Moody's warns Illinois raising taxes causes rich to leave

Moody's Investor Services warned Illinois's Democratic governor that his plan to more than double income taxes on the rich could create a bigger state deficit if they leave.

Democrat J.B. Pritzker successfully ran for governor of Illinois on a campaign that it was "Not Impossible" for a state with a $7,871,602,484.87 payment backlog to 91,099 vendors and the worst credit rating in the nation to cut taxes while implementing a $15 minimum wage, expanding education and health care, and creating more jobs. 

With Illinois already having the second highest effective property tax rate of 2.32 percent and the fifth highest average sales tax of 8.64 percent, Pritzker was expected on February 20 to ask both Democratic-controlled houses of the state Legislature to dump a 3.75 percent flat-rate state income tax for a progressive Fair Tax that would more than double the state income tax rate to 7.65 percent on incomes over $225,000.

Pritzker's social justice allies claim that the Fair Tax regime would also allow 61,700 more students to enroll in public colleges; 22,000 more seniors to get home-delivered meals and transportation; 24,000 more admissions for addiction treatment; 47,000 more childcare assistance beneficiaries; and 7,800 more beds for domestic violence victims.

Moody's latest credit analysts agree that Illinois's public pension plan is 60 percent unfunded with a liability of $234 billion, about $18,281 per resident.  But Moody's warns that with high taxes and anti-business regulations already causing Illinois to suffer the nation's third highest outmigration at about a 275-per-day average over the last five years, raising taxes risks a meaningful acceleration of the rich leaving for low-tax states.

At least Illinois's Gov. Pritzker will join several other big tax-and-spend Democrat governors to commiserate about the existential financial risks from the rich leaving.

The same day California's new Democratic governor, Gavin Newsom, announced a record $144.2-billion spending plan last month that includes "cradle-to-career" free education, a new $1-billion earned income tax credit, and $100 million for aliens fleeing Central America, the state controller reported a December $4.82-billion tax revenue shortfall.  California has lost 500,000 taxpayers to domestic outmigration over the last decade.

Democrat governor Andrew Cuomo revealed on February 5 that New York's income tax revenue suffered a $2.3-billion shortfall last year due to wealthy residents fleeing to low-tax states.  As the only state losing residents faster than Illinois, Cuomo moaned: "Tax the rich.  Tax the rich.  Tax the rich.  We did that.  God forbid the rich leave."

Connecticut's new Democratic governor, Ned Lamont, who is facing a $1.7-billion deficit and national high unfunded liabilities of $17,418 per resident, will also present his budget proposal on February 20.  Lamont's spokesman stated that "we need to explore new and different options" to obtain stability.  Republican legislators indicated that Lamont is planning sales tax increases on groceries and medications.  Connecticut is already has the fourth highest domestic outmigration at about 60 residents per day.

Moody's Investor Services warned Illinois's Democratic governor that his plan to more than double income taxes on the rich could create a bigger state deficit if they leave.

Democrat J.B. Pritzker successfully ran for governor of Illinois on a campaign that it was "Not Impossible" for a state with a $7,871,602,484.87 payment backlog to 91,099 vendors and the worst credit rating in the nation to cut taxes while implementing a $15 minimum wage, expanding education and health care, and creating more jobs. 

With Illinois already having the second highest effective property tax rate of 2.32 percent and the fifth highest average sales tax of 8.64 percent, Pritzker was expected on February 20 to ask both Democratic-controlled houses of the state Legislature to dump a 3.75 percent flat-rate state income tax for a progressive Fair Tax that would more than double the state income tax rate to 7.65 percent on incomes over $225,000.

Pritzker's social justice allies claim that the Fair Tax regime would also allow 61,700 more students to enroll in public colleges; 22,000 more seniors to get home-delivered meals and transportation; 24,000 more admissions for addiction treatment; 47,000 more childcare assistance beneficiaries; and 7,800 more beds for domestic violence victims.

Moody's latest credit analysts agree that Illinois's public pension plan is 60 percent unfunded with a liability of $234 billion, about $18,281 per resident.  But Moody's warns that with high taxes and anti-business regulations already causing Illinois to suffer the nation's third highest outmigration at about a 275-per-day average over the last five years, raising taxes risks a meaningful acceleration of the rich leaving for low-tax states.

At least Illinois's Gov. Pritzker will join several other big tax-and-spend Democrat governors to commiserate about the existential financial risks from the rich leaving.

The same day California's new Democratic governor, Gavin Newsom, announced a record $144.2-billion spending plan last month that includes "cradle-to-career" free education, a new $1-billion earned income tax credit, and $100 million for aliens fleeing Central America, the state controller reported a December $4.82-billion tax revenue shortfall.  California has lost 500,000 taxpayers to domestic outmigration over the last decade.

Democrat governor Andrew Cuomo revealed on February 5 that New York's income tax revenue suffered a $2.3-billion shortfall last year due to wealthy residents fleeing to low-tax states.  As the only state losing residents faster than Illinois, Cuomo moaned: "Tax the rich.  Tax the rich.  Tax the rich.  We did that.  God forbid the rich leave."

Connecticut's new Democratic governor, Ned Lamont, who is facing a $1.7-billion deficit and national high unfunded liabilities of $17,418 per resident, will also present his budget proposal on February 20.  Lamont's spokesman stated that "we need to explore new and different options" to obtain stability.  Republican legislators indicated that Lamont is planning sales tax increases on groceries and medications.  Connecticut is already has the fourth highest domestic outmigration at about 60 residents per day.