The Object Lesson

There’s at least one good thing that can be said about Illinois. It serves as an object lesson. Washington Post columnist Henry Olsen has noticed:

Pritzker’s budget address Wednesday was an opportunity to do what President Bill Clinton did in similar circumstances in the mid-1990s: restore fiscal discipline while protecting Democratic spending priorities. Instead, he is proposing what every Democratic contender has promised: new spending programs, protections for all existing spending and increased taxes on the rich.

The speech itself is a combination of hope and chutzpah. Pritzker hopes that legalizing marijuana and sports gambling will bring the state an extra $370 million a year. He hopes that a new tax on managed care companies will bring in an additional $390 million a year and more federal money for Medicaid on top of that, without increasing insurance premiums that might drive more people to use government-finance programs. He hopes that legislators getting to know each other as people will lead to more bipartisan cooperation, by which he clearly means Republican support for his proposed tax hikes. That’s a lot of hope for what, in the context of a $39 billion budget and $15 billion in unpaid bills, is pretty small change.

The chutzpah comes from his complete unwillingness to slow down the growth of government. He exempted virtually all existing government spending from significant cuts. He proposed nearly $500 million in new program spending — on child care subsidies, preschool subsidies, colleges and more. And, to top it off, he proposed hiking the state’s minimum wage from $8.25 an hour to $15 an hour, as if that sharp hike wouldn’t cause havoc among small businesses and restaurants.

The classic definition of chutzpah is murdering your parents and throwing yourself on the mercy of the court as an orphan. Pritzker’s audacious gambit has to be the fiscal version of that legendary act.

One of the reasons that a $15/hour minimum wage is such a feckless idea for Illinois is geography. All of Illinois’s population centers with the exceptions of Peoria and Springield (combined population: 300,000) are on the state’s borders and all of Illinois’s neighboring states already have lower minimum wages than Illinois and businesses are already fleeing Illinois for those states—it’s just a matter of moving a few miles or even a few feet to avoid Illinois’s regulations and minimum wage.

However, Mr. Olsen learns the wrong lesson. He notes that Wisconsin has a graduated income tax while Illinois does not, ignoring that Illinois also has the highest sales and property taxes in the nation and is now one of the highest taxing states in the union. It has become a high tax state without the amenities of other high tax states. It doesn’t have the ocean or the mountains or a benign climate and it isn’t home to fast-growing industries. Illinois’s per capita taxes are 30% higher than Wisonsin’s but per capita income is only 9% higher here than in Wisconsin.

Update

The editors of the Wall Street Journal are hating on Illinois today, too:

New Gov. J.B. Pritzker’s plan? Refinance the pension debt and tax plastic bags, marijuana and sports betting, which will supposedly cover the shortfall until voters approve a referendum next year replacing the state’s flat 4.95% income tax with a progressive tax. Mr. Pritzker says a progressive tax will spare the middle class, though there may be a reason he hasn’t proposed a specific higher rate.

Research outfit Wirepoints calculates that the top rate would have to rise to 11.2% on millionaires and at least 8.5% on everyone earning more than $50,000 to finance Mr. Pritzker’s spending proposals. The progressive model is California, where individuals earning more than $56,000 pay a top marginal rate of 9.3%.

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