At 1:20 AM CT, the Illinois Senate passed a controversial deficit reduction planto address the massive state red ink. By a vote of 30-29, they increased individual taxes from 3% to 5% and they increased the corporation tax rate from 4.8% to 7%. Now, the effective corporate tax rate is 9.5%. The law is expected to raise $6.5 billion a year. Illinois needs to patch a $15 billion gap in their budget, including $8 billion in overdue bills.
The only significant Illinois spending change was to limit future increases to 2% annually. They skipped a $1 billion a year Chicago casino plan, they skipped a proposal to overhaul the state’s worker compensation laws and they skipped making any significant cuts to state pensions. "Illinois is in crisis, absolute financial crisis, and there is no way we can dig ourselves out of the crisis without increased revenues," said House Majority Leader Barbara Flynn Currie (D-Chicago), the bill’s chief House sponsor according to the Suntimes.
According to President Obama’s former top economist Christine Romer, tax increases have a negative multiplier effect of about 3:1. According to the Illinois Policy Institute, the early estimates on job losses from the tax plan are around 200k. It is not surprising that Indiana has billboards near the Illinois border touting their lower rates and welcoming Illinois residents and businesses to move to the Hoosier state.