Illinois Senate passes Privilege Tax on investors

[Tugg Speedman]

Isn't the other solution to raise ("jack") taxes?

Help me out here :  https://ballotpedia.org/Tax_policy_in_Illinois



Admittedly that chart is 2015 .. but wouldn't Illinois' cash flow issues disappear if they raised their tax rates to Wisconsin levels?    (Most in WI are at the 6.2% rate.) (WI's sales tax is .75% less, noted.)

Somehow, Wisconsin manages.

Wrong stat.  Look at all-in taxes paid.  The Tax Foundation measures this via the Tax Freedom day (the day you work to pay taxes).


https://taxfoundation.org/tax-freedom-day-2017/



Note that Illinois is already #44 in taxes paid, higher than any other state in the Midwest.

And because the tax burden is crushing, this is happening ...

Cook County Illinois Suffers Largest Population Drop In Entire US
http://www.zerohedge.com/news/2017-03-26/cook-county-illinois-suffers-largest-population-drop-entire-us

Illinois loses more residents in 2016 than any other state
http://www.chicagotribune.com/news/local/breaking/ct-illinois-population-decline-met-20161220-story.html

Who leaves?  The answer, those that have the means to leave.  Or, those that pay taxes leave.  Those that depend on services stay, because they lack the means to leave.

So, Illinois problem is very simple ... it has lost too many people (taxpayers) and its tax base is shrinking while its obligations are not shrinking.  The reason people are leaving is the cost of staying pushes them out.

So the absolutely wrong thing to do it jack up taxes. Jacking up taxes is the cause of the problem in the first place, not the solution.

[Chili]

Wrong stat.  Look at all-in taxes paid.  The Tax Foundation measures this via the Tax Freedom day (the day you work to pay taxes).


https://taxfoundation.org/tax-freedom-day-2017/



Note that Illinois is already #44 in taxes paid, higher than any other state in the Midwest.

And because the tax burden is crushing, this is happening ...

Cook County Illinois Suffers Largest Population Drop In Entire US
http://www.zerohedge.com/news/2017-03-26/cook-county-illinois-suffers-largest-population-drop-entire-us

Illinois loses more residents in 2016 than any other state
http://www.chicagotribune.com/news/local/breaking/ct-illinois-population-decline-met-20161220-story.html

Who leaves?  The answer, those that have the means to leave.  Or, those that pay taxes leave.  Those that depend on services stay, because they lack the means to leave.

So, Illinois problem is very simple ... it has lost too many people (taxpayers) and its tax base is shrinking while its obligations are not shrinking.  The reason people are leaving is the cost of staying pushes them out.

So the absolutely wrong thing to do it jack up taxes. Jacking up taxes is the cause of the problem in the first place, not the solution.

The thing is the most people leaving the state are low income people. Higher income people are still sticking around as they want to live in Chicago vs. other midwest places. It's the only big city in the midwest so that has a draw.

[Tugg Speedman]

The thing is the most people leaving the state are low income people. Higher income people are still sticking around as they want to live in Chicago vs. other midwest places. It's the only big city in the midwest so that has a draw.

You said the same thing ... people that pay taxes are leaving.

[mu_hilltopper]

These facts are inconvenient! 

[muwarrior69]

http://www.cnsnews.com/news/article/federal-subsidies-chicago-schools-4-billion-4-years-10540-student

I'm paying for Chicago schools.

[GGGG]

You're paying for every public school district in the country. You just realized this?

[muwarrior69]

You're paying for every public school district in the country. You just realized this?

My school district does not get 10K per student from the federal government.

[GGGG]

My school district does not get 10K per student from the federal government.

It gets something.

[jsglow]

Is is pretty interesting to me that the tax chart and the red/blue political map line up pretty well.

[warriorchick]

The thing is the most people leaving the state are low income people. Higher income people are still sticking around as they want to live in Chicago vs. other midwest places. It's the only big city in the midwest so that has a draw.

Source?

And if you think Chicago is the only big city in the Midwest, you need to brush up on your geography.

[Pakuni]

Source?

See pages 17-18. Those with incomes of $25K or less are leaving at greater rates than those with larger incomes.
https://www.iml.org/file.cfm?key=5203

[warriorchick]

Source?

See pages 17-18. Those with incomes of $25K or less are leaving at greater rates than those with larger incomes.
https://www.iml.org/file.cfm?key=5203

Thanks.  I actually read it (not sure you did) and had these takeaways:

1.  The "average income per migrant" includes children.  Therefore, a mom, dad, and three kids whose household income is $124,000 would all be counted as part of the "under $25,000" strata.  I would contend that a young family with a 6-figure income are the type of folks you don't want moving out.


2.  Over 5% of the net migrants out are 18 and 19 year olds.  My guess is that the overwhelming majority of those are kids going to college out of state or joining the military. Obviously, the average income of those people is going to be well under $25K, and their decision to move is not affect by state tax rates.

I would like to see these same study using household income as opposed to individual income, and excluding full-time students.  Then you would have some useful data.

[forgetful]

Thanks.  I actually read it (not sure you did) and had these takeaways:

1.  The "average income per migrant" includes children.  Therefore, a mom, dad, and three kids whose household income is $124,000 would all be counted as part of the "under $25,000" strata.  I would contend that a young family with a 6-figure income are the type of folks you don't want moving out.


2.  Over 5% of the net migrants out are 18 and 19 year olds.  My guess is that the overwhelming majority of those are kids going to college out of state or joining the military. Obviously, the average income of those people is going to be well under $25K, and their decision to move is not affect by state tax rates.

I would like to see these same study using household income as opposed to individual income, and excluding full-time students.  Then you would have some useful data.

1.  Not sure that your takeaway is correct.  It does not list the AGI per person, it lists it per exemption.  That would only include then the individual and their spouse if they have one. 

2.  Those going to college out of state would not appear as a migrant, as they would still be considered a dependent of their family, and would hence not constitute an exemption. 

Seeing it for individual income would largely not be possible, because those that are married and filing jointly will have a combined AGI and the IRS does not separate back out the individual AGI's for reporting purposes.

[jesmu84]

You said the same thing ... people that pay taxes are leaving.

So high income people aren't paying taxes?

[Pakuni]

Thanks.  I actually read it (not sure you did) and had these takeaways:

1.  The "average income per migrant" includes children.  Therefore, a mom, dad, and three kids whose household income is $124,000 would all be counted as part of the "under $25,000" strata.  I would contend that a young family with a 6-figure income are the type of folks you don't want moving out.


2.  Over 5% of the net migrants out are 18 and 19 year olds.  My guess is that the overwhelming majority of those are kids going to college out of state or joining the military. Obviously, the average income of those people is going to be well under $25K, and their decision to move is not affect by state tax rates.

I would like to see these same study using household income as opposed to individual income, and excluding full-time students.  Then you would have some useful data.

First, I apologize for my bad post quoting in my earlier post.
Also:
 - I think forgetful is correct about exemptions.
- Since the study is based in part on tracking IRS filings, I don't believe 18-year-olds who leave Illinois temporarily for college out of state would count as migrants, as they're unlikely to start immediately - if ever - filing individual tax returns in the state in which they attend school.

As for a household income survey, I've looked and not found it, but I'll keep searching.
This is perhaps a bit more anecdotal, but telling nonetheless. A deep dive of the population loss in Chicago shows that the vast, vast majority of it is the result of an exodus from the South and West sides. The Loop and North sides are, in fact, growing  .... substantially so, in the case of the Loop.
I suspect I don't need to tell you the likely household incomes of South and West side residents vs those living in or moving into the Loop, Lincoln Park and Lakeview.
Suffice to say these numbers belie claims that people with money are fleeing Chicago or Illinois. To the contrary, they appear to be the people staying or moving in. It's the lower-income residents leaving. And I'd venture to guess (speculation on my part) it's not the budget impasse, pensions and taxes that's causing them to leave. It's crime, a lack of economic opportunity, poor schools and a continually weakening safety net ... none of which is likely to get better through lowers taxes for the people moving to Lake Point Tower.

http://www.chicagobusiness.com/article/20161213/BLOGS02/161219983/as-loop-population-booms-south-sides-plummets

In the meantime, there's an unprecedented boom in the development of high-end apartments downtown.
http://www.chicagobusiness.com/realestate/20161114/CRED02/161119947/for-downtown-apartment-landlords-a-tough-year-ahead

[warriorchick]

First, I apologize for my bad post quoting in my earlier post.
Also:
 - I think forgetful is correct about exemptions.
- Since the study is based in part on tracking IRS filings, I don't believe 18-year-olds who leave Illinois temporarily for college out of state would count as migrants, as they're unlikely to start immediately - if ever - filing individual tax returns in the state in which they attend school.

As for a household income survey, I've looked and not found it, but I'll keep searching.
This is perhaps a bit more anecdotal, but telling nonetheless. A deep dive of the population loss in Chicago shows that the vast, vast majority of it is the result of an exodus from the South and West sides. The Loop and North sides are, in fact, growing  .... substantially so, in the case of the Loop.
I suspect I don't need to tell you the likely household incomes of South and West side residents vs those living in or moving into the Loop, Lincoln Park and Lakeview.
Suffice to say these numbers belie claims that people with money are fleeing Chicago or Illinois. To the contrary, they appear to be the people staying or moving in. It's the lower-income residents leaving. And I'd venture to guess (speculation on my part) it's not the budget impasse, pensions and taxes that's causing them to leave. It's crime, a lack of economic opportunity, poor schools and a continually weakening safety net ... none of which is likely to get better through lowers taxes for the people moving to Lake Point Tower.

http://www.chicagobusiness.com/article/20161213/BLOGS02/161219983/as-loop-population-booms-south-sides-plummets

In the meantime, there's an unprecedented boom in the development of high-end apartments downtown.
http://www.chicagobusiness.com/realestate/20161114/CRED02/161119947/for-downtown-apartment-landlords-a-tough-year-ahead

Taxpayers receive an exemption for each qualifying child:

https://www.irs.gov/publications/p17/ch03.html


If they are using tax returns to determine migration, then they are either using the address of the person filing the return, or noting the state in which the person filed a return.  My kids had to file Wisconsin State tax returns to get back the 80 bucks or whatever they had paid in in state income tax on their school jobs.  Before that, they had to file in Illinois for their summer lifeguard jobs.  Therefore, it is quite possible that they counted each of my kids as being someone whose income is $2,000 per year migrating to Wisconsin.  That's the kind of thing that is going to drag down your average.

In any case, the study you cite is strictly based on correlation.  And as we all know, correlation (or the lack thereof) is not causation (or the lack thereof).

[Pakuni]

Taxpayers receive an exemption for each qualifying child:

https://www.irs.gov/publications/p17/ch03.html

Either way, the point and premise (which you've not addressed) remains the same - it's not the well-heeled that are leaving Illinois. It's the lower and working classes. And the other data I posted supports it further. Adding to that, the trend is the same in the suburbs. It's the poorer near South and West suburbs like Cicero, Harvey, Berwyn, Calumet City, that are seeing the bigger declines, while better off communities like Naperville, Lisle, St. Charles, Vernon Hills, Arlington Heights, etc., are growing.
http://reportcards.dailyherald.com/gfx/2017/census2016/index.html

I'm not saying that's a good thing either, but it flies in the face of arguments that wealthy residents are fleeing the state en masse because the taxes are too darned high. It's the lower and working classes that are leaving because of the lack of opportunity.

[Tugg Speedman]

Are you arguing that the population loss is good for Illinois financial position?

As far as lower income leaving the west and south sides... Illinois and Chicago terrible financial position means crappy schools, high crime and lack of opportunities.  They leave with their taxes with them and the vicious cycle continues.

It ends with bankruptcy and every gets some percentage of what they are owed, not all they are owed.

[Pakuni]

We are arguing that the population loss is good for Illinois financial position?

Nobody has made that argument.
That said, the argument could be made that fewer low-income residents = fewer citizens receiving public benefits without contributing much to their cost. I'm not making that argument, though.

As far as lower income leaving the west and south sides... Illinois and chicago terrible financial position means crappy schools, high crime and lack of opportunities.  They leave with their taxes with them and the vicious cycle continues.

Huh. I've been told around here that poor people don't pay taxes. Don't have "skin in the game" or something like that.
But yes, that's just what I said ... poor and working class people are leaving because of crime, flailing schools, weak social services and a lack of opportunity.
They're not leaving because their property taxes are too high and they're worried about teacher pensions.

It ends with bankruptcy and every gets some percentage of what they are owed, not all the are owed.

States are legally forbidden from filing for bankruptcy. It would take an act of Congress to change that. Do you think Congress wants to get involved in Illinois' mess? You think they want take sides in it?
The other problem, of course, is persuading a judge that a state with one of the 13th lowest income tax in the nation has no means to pay its debts without bankruptcy.
And, I'll need a Constitutional scholar to weigh in on whether a bankruptcy judge can negate the Illinois Constitution's prohibition on diminishing benefits.

[Tugg Speedman]

Record numbers leaving and this ...

ILLINOIS STATE WORKERS HIGHEST PAID IN NATION
https://www.illinoispolicy.org/reports/illinois-state-workers-highest-paid-in-nation/



edit: image width

[Tugg Speedman]

Again the problem is not too low taxes, it's overpaying state and municipal workers and granting benefits it cannot afford.  Combined with a major loss of population (taxpayers) and when have this ...


Report: Illinois is the worst state to be a taxpayer
POLITICS 04/15/2015, 11:36am

http://chicago.suntimes.com/politics/report-illinois-is-the-worst-state-to-be-a-taxpayer/

For Illinois residents, there’s isn’t much good financial news.

In fact, it’s so bad, even Abraham Lincoln is feeling the effects of it, 150 years after his assassination.

And now, a new report from Wallet Hub rubs salt in your Tax Day wounds. The report shows Illinois residents have the highest state and local tax obligations, paying more than 2.5 times more than the cheapest states.

This comes on the heels of a report showing Illinois has the second-highest real estate taxes in the nation. The state also has one of the most unfair tax systems.

Wallet Hub “calculated relative income tax obligations by applying the average American’s income to the effective income taxes rate in each state and locality” to come up with the rankings.

The average Illinois resident will pay $7,719 in state and local taxes.

[Tugg Speedman]

States are legally forbidden from filing for bankruptcy. It would take an act of Congress to change that. Do you think Congress wants to get involved in Illinois' mess? You think they want take sides in it?
The other problem, of course, is persuading a judge that a state with one of the 13th lowest income tax in the nation has no means to pay its debts without bankruptcy.
And, I'll need a Constitutional scholar to weigh in on whether a bankruptcy judge can negate the Illinois Constitution's prohibition on diminishing benefits.

The same was said about Puerto Rico and this happened and set the precedent

Puerto Rico Declares a Form of Bankruptcy
https://www.nytimes.com/2017/05/03/business/dealbook/puerto-rico-debt.html
The action sent Puerto Rico, whose approximately $123 billion in debt and pension obligations far exceeds the $18 billion bankruptcy filed by Detroit in 2013, to uncharted ground.

While the court proceedings could eventually make the island solvent for the first time in decades, the more immediate repercussions will likely be grim: Government workers will forgo pension money, public health and infrastructure projects will go wanting, and the “brain drain” the island has been suffering as professionals move to the mainland could intensify.



And while not a state, this wasn't supposed to be possible either ....

Detroit becomes largest U.S. city to enter bankruptcy
https://www.usatoday.com/story/news/nation/2013/12/03/detroit-bankruptcy-eligibility/3849833/




The Case for Allowing U.S. States to Declare Bankruptcy
States can’t seek legal protection from their debts, but there’s a move on to change that.
January 21, 2016, 3:44 PM CST
https://www.bloomberg.com/news/articles/2016-01-21/the-case-for-allowing-u-s-states-to-declare-bankruptcy

Don't Be So Sure That States Can't Go Bankrupt
https://www.forbes.com/sites/johnmauldin/2016/07/28/dont-be-so-sure-that-states-cant-go-bankrupt/#5151298f2f2d

In Illinois, Some Push Bankruptcy As Solution To Troubled Public Budgets
https://www.forbes.com/sites/legalnewsline/2016/04/19/in-illinois-some-push-bankruptcy-as-solution-to-troubled-public-budgets/#5841b55b33d2

[jficke13]

The same was said about Puerto Rico and this happened and set the precedent

[...]


And while not a state, this wasn't supposed to be possible either ....

Detroit becomes largest U.S. city to enter bankruptcy
https://www.usatoday.com/story/news/nation/2013/12/03/detroit-bankruptcy-eligibility/3849833/

[...]

Chapter 9 of the bankruptcy code was specifically written to govern municipal bankruptcies. The questions regarding Detroit's bankruptcy wasn't whether or not municipalities could file for bankruptcy protection, but whether Detroit qualified under the law.

[B. McBannerson]

Triggered much?

No. Did the rules change?  http://www.muscoop.com/index.php?topic=51888.0

[DegenerateDish]

Of the top 11 wealthiest cities in Illinois (per Forbes), only Hinsdale, OakBrook, Hawthorn Woods, and Western Springs saw population growth from 2014 to 2016.