ITEF Comment – Vol. XV Issue 6

TOTAL STATE REVENUES DIP MODESTLY IN FY2009

By Jim Tobin

Peoria – For the first time in six years, since ITEF began tracking state revenue, total Illinois state revenue is down from the previous year, according to data from the Illinois Comptroller’s website. Total tax revenue for the first 7 months of FY 2009 decreased $1.5 billion, 4.2%, over the same period in FY 2008.  This modest dip in state revenue is not a fiscal crisis.

Once again, the politicians in Springfield are complaining about lower than forecasted revenue. The major problem is not revenue, but spending, which the state legislatures do not want to control. State legislators and newly appointed Governor Patrick Quinn want to pass a 67% state income tax. So far, personal income tax revenue for FY2009 is down $52 million, 0.9%, from the first seven months of FY2008.  However, state income tax revenues increased $2.3 billion in the two years ending June 30, 2008, without a rate increase. Corporate income taxes have decreased $205 million or 13.8%.

State sales tax revenue dropped by $155 million or 2.7% while tax revenues from the federal government were down $529 million or 6.8%. However, federal revenue may jump by up to $3 billion.  Once again, oppressive state taxes caused Tobacco Tax revenues to decline, this time by $24.7 million or 6.5%, while the new statewide smoking ban contributed to a massive drop in casino tax revenue, to the tune of $119 million or 25.8%. Motor Fuel Taxes did manage to increase in FY2009, going up by $53 million or 7.3%.

Springfield’s spending spree is continuing in FY2009. Illinois has over $54 billion in unfunded pension debit. Meanwhile, 3,195 retired government employees received greater than $100,000 in annual state pension benefits last year. The best way to reduce the unfunded pension liability is to cap Illinois state and local government retirement benefits at $50,000 and start new hires on private 401(k)s. It is immoral to force taxpayers to fund these lavish pension benefits.

Total state revenue had increased beyond the rate of inflation during the five years ending June 30, 2008, so the modest dip this year is hardly what state politicians are calling a “revenue crisis.” It is a spending problem.  Had the state budgeted better and not just assumed that revenues would continue to increase forever, the state would be better able to withstand a downturn in the economy. Instead the state went on a spending spree with little or no regard for the future.

The ITEF analysis of the first 7 months of FY2009 Illinois state revenue may be found on our web site at www.ntui.org.

Jim Tobin is the President of the Illinois Taxpayer Education Foundation (http://www.ntui.org/)

Click here for the ITEF Comment

Click here for the Revenue Analysis

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