Senator McCarter: Week In Review

September 26, 2018

A new week and new reports about the struggles Illinois is facing. Regrettably, the biggest cause of our general financial problems – for which taxpayers are ultimately responsible – are self-inflicted. I continue to focus on this issue to draw attention to the poor policy decisions being made for years, and perhaps inspire or motivate the people in charge to change.

Self-inflicted Harm
By definition, self-inflicted harm is avoidable. Sure, there were some things beyond our control, such as the 2008/2009 downturn in the economy and the Wall Street crash but – nearly every other state has recovered. Illinois is still struggling, as I have pointed out in many of my columns.

As we have come to learn, wrong-track governance has people fleeing wrong-track governments. Illinois is a prime example, being one of the leading states for out-migration. A new report by the Cato Institute puts this trend into focus.The study of 2016 IRS data found:
· Illinois lost 41,965 households to other states.
· Illinois lost a net $4.8 billion in income earned by those who left.
By the way, Illinois had the highest rate of out-migration among the 50 states in 2017. Since 2008, Illinois has consistently ranked in the top-five states for out-migration. However, the Cato report points out the trend extends back decades for many states, including ours: “Illinois was among the top five states for net migration loss between 1993 and 2010.”
Wrong Track
· As I predicted after the budget vote this year, and as we subsequently learned, the Illinois budget passed in May was not balanced. I was one of only two senators to vote ‘no’ on the bogus budget deal.
· S & P Global Ratings ranks Illinois’ credit rating at just above “junk status.”
· In its “2018’s Best & Worst State Economies,” WalletHub – a personal finance website – ranked Illinois’ economy 35th among the 50 states, and pointed out Illinois’ “Economic Health” component ranked 49th.
· In the “2018 State Business Tax Burden Rankings Report” by the Anderson Economic Group, Illinois’ business tax ranking puts the state in 35th place, with a total business tax burden of 9.74 percent. However, it should be noted this report was finalized BEFORE last summer’s income tax hike, which raised taxes on employers and individuals alike. Illinois job creators already faced a corporate income tax among the top-ten highest in the nation but, again, that was BEFORE the 2017 tax hike.

Right Track
During my time in the Illinois Senate, I offered four reality-based budget plans that would have restored fiscal responsibility and reduced the need for new taxes or made the recent income tax hikes unnecessary. These plans included tackling our single largest (at an estimated $130 billion) public debt problem: public pensions. The principles behind the pension reforms included:
· Pro-taxpayer today and for the next generation.
· Protect the solvency of the state’s five pension systems.
· Apply the same pension rules to everyone.
· Keeping promises to current retirees and employees.
· A modified pension is a lot better than a bankrupt one.

This looming, ticking time bomb of debt also puts our state – and by extension the state’s taxpayers – in a precarious position. Experts believe Illinois is poorly positioned to face another economic downturn like the so-called “Great Recession” of 2008/2009. On Alton radio station WBGZ, a recent report on Illinois’ pension debt quotes a visiting finance professor who estimated the extent of our pension debt problem as each resident of owing $12,000!

The First Step to Recovery: Admit Your Problem
Runaway spending, sky-high property taxes, two major state income tax hikes in six years on working families and employers, and over-regulation have literally taken money right out of the economy; right out of the pockets of individuals and businesses alike. Just the income tax hikes of 2011 and 2017 alone account for about $35 billion. That’s not counting Illinois’ second most-burdensome in-the-nation property tax, according to the consumer website WalletHub. The state also ranks among the worst, according to Chief Executive Magazine for the one-two punch of taxation and business regulations that choke off investment and make hiring too costly.

In addition to short-sighted decision-making, Illinois also suffers from an ideological paralysis that limits or shuts off debate. The ‘winner-take-all’ approach to politics is great if you’re on the winning side of the political aisle but, reality shows the citizens of Illinois have not been well-served.

One of the lessons I learned from my time in the Illinois Senate is that government’s effectiveness is equal to the compassion and servant leadership of the politicians in power, and their willingness for tough, crucial conversations, and honesty with the people.

Notable Quotable
“…governments are instituted among men, deriving their just powers from the consent of the governed.” – Declaration of Independence; Adopted by Congress on July 4, 1776