The Ba­nana Repub­lic of Illi­nois Its ‘tax and spend’ pol­icy is caus­ing res­i­dents to flee, with their pen­sions

The Washington Times Weekly - - Commentary -

He ar­gued that the su­per rich in Illi­nois could eas­ily af­ford to pay a big­ger share of the tax load and no one would leave. The more Mr. Quinn raised taxes, the deeper the bud­get hole got. Whole re­sort towns in Florida and Ari­zona have be­come high­in­come refugee camps of for­mer af­flu­ent res­i­dents of Chicagoland. In 2014 the vot­ers dumped Mr. Quinn and his tax and spend eco­nomics and opted for busi­ness­man Bruce Rauner, a Repub­li­can. Mr. Rauner tried to fight the em­pire in Spring­field, but was stymied ev­ery step of the way. Democrats laughed away his call for a con­sti­tu­tional spend­ing cap, re­forms to a pen­sion sys­tem that is $200 bil­lion in the red, a prop­erty tax cap, and so on. In­stead the Democrats’ mantra sounded a lot like the gi­ant plant in the film “Lit­tle Shop of Hor­rors”: “feed me.”

If there is any state that desparately needs term lim­its it is this one.

The tax in­crease is a punt in deal­ing with the mas­sive un­funded li­a­bil­i­ties in its gov­ern­ment pen­sion sys­tem. Ac­cord­ing to the Coun­cil On Gov­ern­ment and Fi­nan­cial Ac­count­abil­ity, Illi­nois’ pen­sion pay­ments are the ma­jor con­trib­u­tor to spend­ing growth. Fol­low­ing the re­cent credit down­grade, Moody’s cited the state’s over­whelm­ing pen­sion debt level as a con­trib­u­tor to the poor credit rat­ing and neg­a­tive out­look. In Novem­ber, the state re­ported hav­ing $130 bil­lion in un­funded pen­sion li­a­bil­i­ties, but Moody’s cal­cu­lates that level of pen­sion debt as twice as high — or $251 bil­lion. A re­cent Hoover In­sti­tu­tion anal­y­sis es­ti­mates Illi­nois’ pen­sion fund­ing ra­tio to be 29 per­cent, the low­est level in the United States.

Ac­cord­ing to Donna Ar­duin, a for­mer bud­get ad­vi­sor to Gov. Rauner, if the pen­sions aren’t cur­tailed, soon as much as one in four tax dol­lars in the state will not go for schools, or roads, of health care, or po­lice and fire, but pen­sion pay­ments to re­tired em­ploy­ees — many who no longer live in the state.

With a fi­nan­cial out­look like this, is it any won­der that some half-mil­lion more Amer­i­cans left Illi­nois than moved there over the last decade? Only two states — Cal­i­for­nia and New York, two other lib­eral pan­theons — have lost more res­i­dents to other states than Illi­nois.

The re­cent ac­tions in Spring­field bring to mind the words of for­mer In­di­ana Gov. Mitch Daniels who once joked: “Be­ing a neigh­bor to Illi­nois is like liv­ing next door to the Simp­sons.”

So what is the les­son for the rest of Amer­ica? Soak the rich eco­nomics al­most never works. As tax re­ceipts keep sink­ing in Illi­nois, the safety net is tat­tered, the roads are in dis­re­pair, crime is out of con­trol in Chicago, and the state is home to some of the worst schools in the na­tion.

When you try to soak the rich, they leave, the state goes bank­rupt and it’s the mid­dle class that gets all wet. How’s that for tax fair­ness?

Why is the na­tional me­dia ig­nor­ing this story? Stephen Moore is an eco­nomic con­sul­tant at Free­dom Works and se­nior eco­nomic an­a­lyst at CNN.

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