On January 12, the Illinois House passed a massive income-tax increase to help the state dig out of a $13 billion deficit. The question now is whether the tax hike will help or hurt the Illinois economy. According to Ken McMillan, Professor of Political Economy and Commerce at Monmouth College, the state faced a dilemma. “There was a major crisis in the state of Illinois, and the state had two options: to reduce spending or to increase taxes.” In the short term, most state officials say Illinois had no choice but to increase taxes which will allow the State to decrease some outstanding debt and pay this year’s bills. But will the tax increase hurt the state economy in the long run?
In addition to an increase in individual income-tax rates from 3% to 5%, there was a corresponding corporate tax rate increase from 4.8% to 7%. McMillan, a former State Senator, says it’s the corporate tax hike that will hurt the state in the long run. “Illinois’ corporate tax is the highest in the country. As of now, Illinois is a much less attractive place to live in.” Companies look at the facts and see that corporate income taxes are now higher than surrounding states; so many companies may choose to go elsewhere.
To many college students, the tax hike may not seem relevant, but when reality sets in after college, graduates will see the effect of the income tax on their paychecks . Less money in a paycheck means less money spent on extra activities that could boost the troubled economy in this country, and especially Illinois. And if Illinois corporations decide to leave the state, it will mean fewer jobs for college graduates to fill.