On Monday, Democrats and a few Republicans in the Illinois House of Representatives passed a massive tax increase. Designed to stave off Illinois' looming debt downgrade to junk status, the new taxes will bring $5 billion into the government coffers.
But this move will only make things worse for the state.
As I've noted previously, Illinois' difficulties are structural. It has a vast, unfunded pension liability and a completely out-of-control public sector. By out-of-control, I mean that Illinois public sector unions call the shots in Springfield. And their shots are healthcare, compensation, and retirement plans that are completely unaffordable. This means that the state is faced with an ever-growing black hole into which it must pour money. In a normal state, the government would be pushing for wholesale reforms to the public employment system. But not in Illinois. Here, Democrats bow to their special-interest masters, the big unions, and even the tepid reform package they tried to implement was struck down by the state Supreme Court.
By failing to institute reforms alongside these tax hikes, Illinois Democrats are ignoring the focal issue. The issue is not an absence of government revenue; it's the extraordinary fiscal burdens that government has taken on.
But it's worse than that.
That's because, by raising income taxes from 3.75 percent to 4.95 percent and the corporate tax rate from 5.25 percent to 7 percent, Illinois just became a whole lot less attractive for business investors. Illinois is already experiencing an exodus of employers and jobs. Facing excessive property tax rates, zealous over-regulation, and a dark fiscal horizon, businesses know that investing in Illinois is a recipe for disaster. They are flocking to neighboring Indiana in droves.
Again, the Illinois government just gave those employers — and prospective new employers — a reason to leave the state as soon as possible.
Ultimately, Illinois is signing its own economic death warrant. Failing to address its structural challenges, the land of Lincoln will soon become a no-man's land for opportunity.
It's a warning we should all take notice of.