Obama Just Doing What He Learned in Illinois
A great article on the fiscal situation in Illinois and how politicians see tax increases as an excuse to spend more, not a tool for fiscal discipline.
Two days ago, I explained that tax increases are bad policy. More specifically, I warned that giving more money to government exacerbates fiscal problems because politicians respond to the expectation of more revenue by spending more than otherwise would be the case. And since they usually over-estimate how much revenue a tax hike will generate, that creates an even bigger fiscal mess. Not surprisingly, I cited Europe to bolster my case. The tax burden has increased enormously in Europe over the past several decades, but that obviously hasn’t prevented a fiscal crisis in nations such as Greece and Portugal. And tax hikes haven’t precluded deteriorating conditions in countries such as Belgium and France. But I also cited Illinois, which just got downgraded by Moody’s – even though state politicians just imposed a record tax hike. This caused some angst for a lefty blogger in Illinois, who wrote that, “Operational spending is down since the Illinois tax hike.” I gather he thinks this is some sort of gotcha moment, but two sentences later he admits that, “If Illinois hadn’t increased its taxes, it would’ve had to cut $7 billion more from spending to balance its budget.” In other words, his post confirms my point about higher taxes translating into higher spending. He openly admits that the tax hike was a substitute for spending restraint.Illinois latest trick is to up nursing home licenses up by 1100% because see that's not a "tax increase". Illinois recently doubled its income tax, sold our lottery, etc etc and every move that the politicians sell as a move to balance the budget becomes income with which to make payments on even more debt. Obama is just running the nation the same way he learned to ruin things in his home state. Recently Illinois has been having to grant companies special tax breaks as business threaten to flee to more friendly states such as Indiana. Which has a better tax rate as well as a balanced budget.
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