Illinois has been desperate to increase tax revenues. Two years ago the Democrats at midnight on the last day of a lame duck session raised income tax rates by 66% from a flat 3% rate to a flat 5% rate. Or put another way, they took an extra week’s pay from the pockets of every working family in the state.
But that still wasn’t enough. Instead of limiting their spending (like they promised) they just reduced the rate at which they were increasing spending. And funny thing, Illinois didn’t raise anywhere near their projected increase in revenue. Democrats can’t figure out why, but they’re sure it’s Bush’s fault.
Since their midnight tax increase didn’t fill their budget hole and since they want more revenue, they decided they needed to raise taxes again. This time they picked on a different group of people… the hated smokers! The State raised the tax on cigarettes by $1 per pack a few weeks ago. Of course their projected revenue figures are showing static thinking and they assume that by doubling the tax rate, they’ll double revenues.
Yesterday I was in Iowa for some work and noticed that nearly every gas station, convenience store, or other business that sells cigarettes had a sign out front specifically aimed at Illinois smokers. They know that people are crossing the border to avoid paying the new tax.
Democrats just can’t seem to figure out that people aren’t static in their behavior. When they raise tax rates, rational people will change their behavior accordingly. People who are taxed too much in Illinois will move or make other changes to avoid the pain induced from the increases. The result is that revenues NEVER meet projections. Democrats need to change their static thinking and become a bit more dynamic.