I made a comment somewhat along the lines of what I posted here to a post by Doug Mataconis at OTB and I was a bit puzzled by some of the responses to it. They reminded me of the story about the guy who lost a dollar on every sale who was convinced he would make it up in volume.
Illinois’s problem is that its expenses are growing faster than its revenue and, since the underlying economic activity that its revenue are based on isn’t growing either, it can’t cause its revenue to increase as fast as its expenses by raising the marginal rates. A case in point is the affiliates tax Illinois passed last year and recently declared unconstitutional and invalid. Rather than yielding additional revenue it actually reduced revenue (since most online retailers dropped their affiliates program in Illinois rather than collecting the tax). Adding insult to injury the state was forced to defend the law in court and lost.
I’m still waiting for the people (like Medicaid recipients or Chicago teachers) who are outraged at the state or city’s inability to maintain their benefits or raise their pay, respectively, to explain what they think should be done.