66% tax increase in Illinois

[NorvTurnerOverdrive]

LINK

The increase means an Illinois resident who now owes $1,000 in state income taxes will pay $1,666 at the new rate. After four years, the rate drops to 4 percent and that same taxpayer will then owe $1,333.

Republicans predict the tax eventually will be made permanent.

"It's a cruel hoax to play on citizens to say this is temporary," said House Minority Leader Tom Cross, R-Oswego.

which reminded me of this LINK

It was December 1, 2008. That morning would be the first time that the Chicago City Council would be formally notified that Mayor Richard Daley had struck a deal with Morgan Stanley to lease all of Chicago's parking meters for seventy-five years. The final amount of the bid was $1,156,500,000, a lump sum to be paid to the city of Chicago for seventy-five years' worth of parking meter revenue.

The bigger problem was that Chicago sold out way too cheap. Daley and Co. got roughly $1.2 billion for seventy-five years' worth of revenue from 36,000 parking meters. But by hook or crook various aldermen began to find out that Daley had vastly undervalued the meter revenue.

When Waguespack did the math on that $608,000 he was going to be charged, he discovered that the company valued the meters at about 39¢ an hour, which for 36,000 meters works out to $66 million a year, or about $5 billion over the life of the contract.

any illinois fofcer's? thoughts?

[molson]

Sometimes you need short-term income to balance a state budget and there's just no way around that, but I hate it when they just they just take the narrow view and say "this will bring in X dollars", without accounting for the loss of sales tax revenue, impact on local business, retirement accounts, and personal finance in general. Nobody's going to stop working because of an income tax increase, but that is a lot of money to take out the private sector.

[Abe Sargent]

Originally Posted by molson

Sometimes you need short-term income to balance a state budget and there's just no way around that, but I hate it when they just they just take the narrow view and say "this will bring in X dollars", without accounting for the loss of sales tax revenue, impact on local business, retirement accounts, and personal finance in general. Nobody's going to stop working because of an income tax increase, but that is a lot of money to take out the private sector.

Not necessarily. If the money is then used to hire more people (just hypothetically as an example), then it is not taking money out of the private sector at all. And then if those people stop getting welfare or unemployment benefits, then the money those programs are giving out changes and...well, you can see the impact is more.

Now, if all Illinois does with that money is send it to China to pay down some debt, then you've got an argument. But if they use it to buy services like construction, employ taxpayers, or purchase goods then it is still circulating.

[molson]

Originally Posted by Abe Sargent

Not necessarily. If the money is then used to hire more people (just hypothetically as an example), then it is not taking money out of the private sector at all. And then if those people stop getting welfare or unemployment benefits, then the money those programs are giving out changes and...well, you can see the impact is more.

Now, if all Illinois does with that money is send it to China to pay down some debt, then you've got an argument. But if they use it to buy services like construction, employ taxpayers, or purchase goods then it is still circulating.

Presumbably they have to make up for shortfalls in the the budget. I doubt any state is expanding/hiring a lot of people these days. So they're probably taking more income as a stopgap measure from loss of expected revenue from other sources (reduced property tax revenue, etc.) It's kind of like using a credit card to make your mortage payment. But, sometimes you gotta do that if you're required to balance a budget. But cutting the take-home income of everyone in your state is going to catch up with you.

[albionmoonlight]

The first of many states to face reality, I would expect. With a few exceptions, we demand more services from our governments than they can support with the taxes we are willing to pay.

This does not make us bad or stupid. It makes us rational and hopeful. Of course we all want more for less. And we want to believe the politicians who say that they can get it for us. But one thing the recession has done is eliminated/reduced the ability to paper over the fundamental disconnect between what we expect our governments to do for us and what we are willing to pay for those services.

So, taxes going up and services going down. Don't see a way around that.

[CU Tiger]

On the parking meters....I can't help but think that 1.2 billion invested in bank CDs would return 5 billion in 75 years..or am I missing something?

[QuikSand]

The time value of money is a vastly underappreciated concept.

[molson]

Originally Posted by albionmoonlight

So, taxes going up and services going down. Don't see a way around that.

Ya, you just have to decide which one you're going to rely on more. It seems like Illinois is trying to maintain its current services, and they're using this measure to try to be able put off real cuts for another year. In my state, they go to the other extreme - they REFUSE to raise any taxes, but will cut and cut until the budget is balanced every year. That might not be the ideal approach either, but I think it does lead to more year-to-year fiscal stability in the state. We get the services we can afford that year, no more.

[Coffee Warlord]

Originally Posted by Abe Sargent

Now, if all Illinois does with that money is send it to China to pay down some debt, then you've got an argument. But if they use it to buy services like construction, employ taxpayers, or purchase goods then it is still circulating.

They'll be using it to fund the shit they can't pay for right now. Trust me, there will be no expansion of anything - this state is VERY behind on their payments to a LOT of business and programs. (My company alone is owed several months & millions, and let's not get into how much they owe schools).

This effectively attempts to bring IL back to being able to pay off their current expenditures. What WILL happen, is we'll get to that level, get more heavy expansion of gov't pork/staff wage hikes ("oh, they've been frozen for awhile - we need to pay them!"), and magically will be right back where we started in a few years when this rate is supposed to drop - broke as all hell.

[DataKing]

While I am a little bothered by this, I am not seething. As the article mentions, Illinois' tax rate remains lower than many other states in the region. But I do agree with the Republicans who predict that it will be made permanent. I was also intrigued by this section from the article:

The tax increase will be coupled with strict 2 percent limits on spending growth. If officials spend above those limits, the tax increase will automatically be canceled. The plan's supporters warned that rising pension and health care costs probably will eat up all the spending allowed by the caps, forcing cuts in other areas of government.

It will be interesting to see how this holds up.

[stevew]

i understand that a 66% increase in taxes can be going from 3% to 5%(possible math fail) but I think that a ton of people will think that their state income tax rate is now 66%.

[Logan]

Originally Posted by CU Tiger

On the parking meters....I can't help but think that 1.2 billion invested in bank CDs would return 5 billion in 75 years..or am I missing something?

Originally Posted by QuikSand

The time value of money is a vastly underappreciated concept.

Chicago makes money as long as they can find an annual rate of return of 2%. Who actually published that crap?

[Mustang]

I thought they were also looking at having all internet sales be charged a 6.5% use tax if the company was in Illinois regardless of where the sale came from. I thought it was going to be rolled into this.

[sterlingice]

Originally Posted by stevew

i understand that a 66% increase in taxes can be going from 3% to 5%(possible math fail) but I think that a ton of people will think that their state income tax rate is now 66%.

this.

SI

[NorvTurnerOverdrive]

idk, i was just reading a glenn greenwald article about the reflexive call for fewer liberties in light of the roll/giffords shooting and can't help but think this might be a more interesting parallel.

i think tough economic times are ahead and with the sharp rise in popularity of tea party politics, some of it bordering on revolutionary radicalism, the gov't may be preparing for larger protests and/or civil unrest.

i mean, there's 300 million people in this country and nobody's happy. you start raising taxes and cutting gov't programs and you don't have to be a social scientist to see there's gonna be some problems.

[Buccaneer]

Changes in tax codes/rates do change behavior.

[RainMaker]

Originally Posted by molson

Sometimes you need short-term income to balance a state budget and there's just no way around that, but I hate it when they just they just take the narrow view and say "this will bring in X dollars", without accounting for the loss of sales tax revenue, impact on local business, retirement accounts, and personal finance in general. Nobody's going to stop working because of an income tax increase, but that is a lot of money to take out the private sector.

Except this won't be short term. From everything I've read, most of the politicians are building these new revenues into future plans. Outside of a few token cuts in spending, the bulk of it hasn't been touched. They refused to look into pensions, which happen to be a huge problem in the state.

People aren't going to stop working because of a tax increase, but they might do so elsewhere. Illinois has been one of the least business friendly states and we've seen a lot of them leave the city and state. Indiana I know is one that has welcomed a lot of new business thanks to our policies. There have been some studies/statistics showing how our policies have hurt. I know our extremely high city tax rate has caused a lot of business conventions to no longer setup shop in Chicago.

I'm fine with tax increases if I'm getting something more from it, and there is cutting going on. But that's not happening. They won't cut anything major and we'll be back on track to where we were before. I guarantee this doesn't get rolled back in 5 years. And I guarantee we'll still be in debt. Although it might not be "we" in 5 years, as I may finally decide to head to a state that wants me and my business.

[RainMaker]

Originally Posted by Buccaneer

Changes in tax codes/rates do change behavior.

With it being across the board, I don't know how it won't. Everyone got a 2% pay cut today. That might be some family's annual college fund contribution.

[stevew]

State Pensions are a ticking timebomb everywhere. Seems like a good place to cut future funding. And if employees want to strike, I'm sure there are plenty of people who would settle for a reduced or pension-less job. I'm not saying you eliminate current commitments. But ones for the future, screw that.

[JPhillips]

Why stop at pensions? If states stopped paying for roads and education think how great the budget would look!

[stevew]

Because that would be stupid?

Pensions, etc....we need to stop behaving and spending like it's the 1980s on our workers, especially our state workers.

[JPhillips]

But stripping people of contractually obligated benefits sounds a wee bit unfair, no?

I get renegotiating pensions, but just saying you won't honor future pensions is just stealing from employees.

[sterlingice]

Going forward, you can try to negotiate out pensions, which I think you had suggested. I'm guessing you don't mean going back on previous promises, correct?

SI

[stevew]

I probably should have been more clear. I don't think you can take money away that has been earned. However going forward we cannot keep funding these things like the past. 1 in 6 of us will live to 100. That means that there will be a ton of people earning a pension for 35 years. If you're told at age 35 or 40 that you're going to need to save more for retirement, you can do it.

[RainMaker]

Originally Posted by stevew

I probably should have been more clear. I don't think you can take money away that has been earned. However going forward we cannot keep funding these things like the past. 1 in 6 of us will live to 100. That means that there will be a ton of people earning a pension for 35 years. If you're told at age 35 or 40 that you're going to need to save more for retirement, you can do it.

If there is no money, there is nothing they can do. I agree with paying what is contractually obligated, but the state is bankrupt. It's simple, we can't pay for it. So they can either negotiate a better rate that we can pay, or we can go the bankrupt route and they can get nothing.

In a perfect world every contract would be fulfilled. But when an entity goes bankrupt, the people owed money don't always get full value.

[JPhillips]

The state isn't close to being bankrupt.

[RainMaker]

It was bankrupt. They haven't been able to pay their bills for awhile. Had to delay all state income tax returns last year. Credit rating is shit. It's about as bankrupt as you get.

[markprior22]

Illinois is the most corrupt and FUBAR state in the nation. I sure hope to see the deficit go down with an tax increase this substantial. I have a feeling that won't be the case. There will be more wasteful spending and funding of existing pensions, etc. I make 42K per year, 500/mo child support, single with no kids at home. My state tax will go up 750-1000 this year. The good news is that the social security tax is being dropped to help offset the state tax increase. Hmmm...not sure I like that idea.

I know hindsight is 20/20 but what were these "great minds" thinking when they started with all the generous pension plans. They are fabulous on day one but didn't anyone think 50 yrs down the road when they might owe more in benefits to people no longer employed than what they are paying current workers? Seems very short sighted to me and you know how difficult it is to take something back after giving it away.

Our biggest employer in Springfield is the state. When I hear the benefits mentioned by friends, it astounds me. It's like you get a vacation day if you show up to work for a week. Every possible holiday is off with pay. Dental, vision, great health insurance...yep, all top of the line.
Am I jealous of this? Probably. On the other hand, I look at my job where we get two weeks vacation, 3 sick days and the basic holidays (no MLK, no Vet Day, no Pres Day, no Good Friday). When did the government work force become the middle class elite?

That's enough of a rant for now but it irks me when people intimate that Illinois is "one of the first states to face reality." That's complete BS. It is the fiscal mismanagement that has put the state in this position and this increase will just keep the wheels turning; I highly doubt we will see a significant decrease in the deficit. Hope I'm proven wrong.

[JPhillips]

Originally Posted by RainMaker

It was bankrupt. They haven't been able to pay their bills for awhile. Had to delay all state income tax returns last year. Credit rating is shit. It's about as bankrupt as you get.

Politically bankrupt maybe, but if the will is there the state could cut spending and/or raise taxes to a point where the pensions would be covered. The only way the state goes bankrupt is if the elected officials chose to do so.

[JPhillips]

Originally Posted by markprior22

Illinois is the most corrupt and FUBAR state in the nation. I sure hope to see the deficit go down with an tax increase this substantial. I have a feeling that won't be the case. There will be more wasteful spending and funding of existing pensions, etc. I make 42K per year, 500/mo child support, single with no kids at home. My state tax will go up 750-1000 this year. The good news is that the social security tax is being dropped to help offset the state tax increase. Hmmm...not sure I like that idea.

I know hindsight is 20/20 but what were these "great minds" thinking when they started with all the generous pension plans. They are fabulous on day one but didn't anyone think 50 yrs down the road when they might owe more in benefits to people no longer employed than what they are paying current workers? Seems very short sighted to me and you know how difficult it is to take something back after giving it away.

Our biggest employer in Springfield is the state. When I hear the benefits mentioned by friends, it astounds me. It's like you get a vacation day if you show up to work for a week. Every possible holiday is off with pay. Dental, vision, great health insurance...yep, all top of the line.
Am I jealous of this? Probably. On the other hand, I look at my job where we get two weeks vacation, 3 sick days and the basic holidays (no MLK, no Vet Day, no Pres Day, no Good Friday). When did the government work force become the middle class elite?

That's enough of a rant for now but it irks me when people intimate that Illinois is "one of the first states to face reality." That's complete BS. It is the fiscal mismanagement that has put the state in this position and this increase will just keep the wheels turning; I highly doubt we will see a significant decrease in the deficit. Hope I'm proven wrong.

Much as with private pensions, the big problem is that the pension funds weren't maintained properly over the years. If government had been setting aside money at a realistic rate there wouldn't be a pension crisis.

[RainMaker]

So the tax increase is going to make sure others in the State get to retire well and is offset by a tax cut that will make sure we don't have any money when we retire.

And you're right about the benefits given to state employees. My Dad has been dating a woman for a couple years now who used to be a high school teacher. He was telling me that she gets around $75,000 a year now that she is retired. My brother applied for a state job and was telling me about how great the benefits looked compared to every other place he looked.

I just don't know why we were giving out all these awesome pensions when no one else was.

[JPhillips]

States can't reduce SS taxes. They are being lowered by 2% as a part of the federal tax cut deal, but I don't think IL can do anything about FICA taxes.

[RainMaker]

I know they can't, I just thought it was funny that SS is giving a tax cut it can't afford while at the same time Illinois is making us pay more to support others retirement pensions.

[markprior22]

Originally Posted by JPhillips

States can't reduce SS taxes. They are being lowered by 2% as a part of the federal tax cut deal, but I don't think IL can do anything about FICA taxes.

Yeah, I misstated that in my angry rant . Still, it irks me that they cut this while raising my state taxes. Sorry for that error.

[cartman]

Originally Posted by RainMaker

It was bankrupt. They haven't been able to pay their bills for awhile. Had to delay all state income tax returns last year. Credit rating is shit. It's about as bankrupt as you get.

Originally Posted by JPhillips

Politically bankrupt maybe, but if the will is there the state could cut spending and/or raise taxes to a point where the pensions would be covered. The only way the state goes bankrupt is if the elected officials chose to do so.

There is no provision in the US Code for a state to declare bankruptcy. There is a provision that allows municipalities to do so, and municipalities are defined as a "political subdivision or public agency or instrumentality of a State." in 11 U.S.C. 101. Since states aren't mentioned, but a lower group is, then a state itself isn't covered. What probably would end up happening is that the various state agencies would have to decide on whether or not to enter bankruptcy proceedings.

[sterlingice]

Originally Posted by RainMaker

And you're right about the benefits given to state employees. My Dad has been dating a woman for a couple years now who used to be a high school teacher. He was telling me that she gets around $75,000 a year now that she is retired. My brother applied for a state job and was telling me about how great the benefits looked compared to every other place he looked.

I'm going to call some shenanigans on this one. If you can point me to the teaching job where you get $75K per year when you retire, then I'm heading to it. I mean maybe if she was some sort of school administrator or some such nonsense where they can vote their own increases but I've never known a teach to make anywhere near that.

SI

[wade moore]

Originally Posted by sterlingice

I'm going to call some shenanigans on this one. If you can point me to the teaching job where you get $75K per year when you retire, then I'm heading to it. I mean maybe if she was some sort of school administrator or some such nonsense where they can vote their own increases but I've never known a teach to make anywhere near that.

SI

Yup - I'm with si here. Show me a place where you can get $75k per year teaching when NOT retired and my wife and I will move there.

[Alan T]

Originally Posted by wade moore

Yup - I'm with si here. Show me a place where you can get $75k per year teaching when NOT retired and my wife and I will move there.

They offer 75k a year for teachers in some school districts depending on factors such as relative wealth of the area, cost of living adjustments for the error, the teacher's experience, degrees held, functionality, etc. (My mother, mother-in law are both teachers and my wife also is a school psychologist, so honest I'm not making these numbers up). That of course is on the high end of things keep in mind and yes most teachers don't make that much.

As for retirement, almost all of them are concerned about having enough money in their retirement, so the 75k a year retired seems pretty bogus to me too. Teachers everywhere that I have seen have their own retirement system that they put money into (similar to our 401k). If they are a life-long teacher who does it for 30 or 35 years, they likely will have enough retirement money in there to make ends meet without too much concern, but definitely not at the 75k mark.

[Alan T]

Dola: Just looked it up to make sure I wasn't off my rocker based on conversations with my family.

Boston schools have an -Average- salary for teachers of $79,415.00 a year.


But anyways, this is more a sidebar discussion based on Wade's post. I agree that 75k a year in teacher retirement seems pretty unlikely anywhere.

[Alan T]

Double Dola:

Ok, my wife tells me I am wrong. Basically teachers put in money into teacher retirement over the course of their professional career and usually the school district matches that.

Once a teacher gets to retirement age (having served enough years to meet the district's requirements/etc), they will get in retirement 80% of their average last 3 years teaching salary.

So my wife told me theoretically someone who had taught for 30 years and put in money into retirement the entire time and ended up with a job paying close to $100k (not normal, but is possible), then theoretically a teacher could end with retirement of $75k.

So I guess it is possible to do.

[Alan T]

Triple Dola:

Wow, doing even more research, there are teachers in Illinois that make more than 600k a year??

Family Taxpayers Foundation

Name: Bouman, Timothy
Salary: $632,000
Position: High School Teacher
Full/Part Time: Fulltime
Percent Time Employed: 100%
Assignment: English (Grades 9-12 Only)
Years Teaching: 12
Degree: Master's
School Name: Noble Street Charter High School
District Name: City of Chicago SD 299

Not bad for a high school english teacher

[sterlingice]

Reminds me of all those fish stories about "those union guys making $70 an hour to turn a screw driver", implying that it's not like a really small and limited subsection where you have to make exceptions (like "in Boston and very high end teachers")

SI

[Passacaglia]

Average teacher salary at New Trier high school in Wilmette, IL is 84,151 and teacher pensions in IL can get 75% of Final Average Pay (highest 4 of last 10, and unused sick leave can bump that up big time).

[Passacaglia]

Originally Posted by sterlingice

Reminds me of all those fish stories about "those union guys making $70 an hour to turn a screw driver", implying that it's not like a really small and limited subsection where you have to make exceptions (like "in Boston and very high end teachers")

SI

Sure, no one said it's common, but people were saying stuff like "point me to a job like that" -- they definitely exist.

[sterlingice]

Originally Posted by Passacaglia

Average teacher salary at New Trier high school in Wilmette, IL is 84,151 and teacher pensions in IL can get 75% of Final Average Pay (highest 4 of last 10, and unused sick leave can bump that up big time).

You mean Wilmette, IL in the middle of Chicago, which according to Zillow has an average home cost of over $500K

60091 Home Prices and Home Values - Zillow Local Info

SI

[Passacaglia]

Originally Posted by sterlingice

You mean Wilmette, IL in the middle of Chicago, which according to Zillow has an average home cost of over $500K

60091 Home Prices and Home Values - Zillow Local Info

SI

I'm familiar with the area -- I never said I didn't choose it for a reason.

[stevew]

75K average is irrelevant when you don't know the pay steps. If Chicago has similar plans to PA, 75K is totally believable. Both of my parents are retired teachers and I'd estimate they are bringing in 45K a year via their retirement. we obviously live in a cheap area but 75k passes the sniff test to me. Especially if she got incentives to retire.

[wade moore]

Originally Posted by Alan T

Dola: Just looked it up to make sure I wasn't off my rocker based on conversations with my family.

Boston schools have an -Average- salary for teachers of $79,415.00 a year.


But anyways, this is more a sidebar discussion based on Wade's post. I agree that 75k a year in teacher retirement seems pretty unlikely anywhere.

Originally Posted by Passacaglia

Average teacher salary at New Trier high school in Wilmette, IL is 84,151 and teacher pensions in IL can get 75% of Final Average Pay (highest 4 of last 10, and unused sick leave can bump that up big time).

At my wife's school, with a master's degree, you max out at 61k. And they pay I think 50% of the last 3 years pay average or something close to that.

[wade moore]

Dola: And I always thought their pay was pretty good. And this is a moderate cost of living area.

[JonInMiddleGA]

Originally Posted by wade moore

Yup - I'm with si here. Show me a place where you can get $75k per year teaching when NOT retired and my wife and I will move there.

Would you settle for $70k and a lower cost of living?

If so, try Pickens County, GA (where I grew up). There's a couple dozen or more teachers at every grade level making that this year.
Open.Georgia.gov

Couple dozen here in Clarke Co too for that matter, although those tend to be skewed toward specialty subjects rather than general classroom teachers.

edit to add: I know the conversation moved toward retirement pay but I interpreted your original comment as being about that dollar level for working (i.e. "when NOT retired").