Progress Illinois

Opponents of an income tax hike in Illinois have criticized Gov. Pat Quinn for flying across the state highlighting the draconian cuts he would have to make under the 50 percent budget approved by the House in May. Republicans like Senate Minority leader Christine Radogno, who called the strategy "cynical and almost immoral," have consistently stated that the budget gap can be filled without a tax increase and that leaders across the aisle are exaggerating the effects trimming the budget would cause.

But viewed from a different angle, it is the tax hike critics who are engaging in their own bit of fear mongering. For one, the tax reforms that are currently on the table are relatively modest in scope and don't represent a debilitating burden. The Wonkish tax calculator is a helpful tool to figure out how each proposal would affect one personally, but the median average family of four with an average property tax burden would pay just $299 extra under the 2 percent hike passed by the Senate. 

Also important to remember: Illinois' deficit isn't necessarily unique. Because tax revenues are down across the country, numerous state governments are looking to increase revenues, as a new report by the Center for Budget and Policy Priorities (CBPP) documents (via Capitol Fax). Here are some highlights:

-- In total, 23 states have already enacted tax increases, and policymakers in another 13 states, as of mid-June, have before them proposals to do the same.

--Six states have enacted measures that will increase revenues from the personal income tax in fiscal year 2010 while 10 states have increased sales tax revenues and seven states have enacted business tax increases

Objectively speaking, raising tax hikes during a recession contradicts counter-cyclical fiscal policy. But you have to consider the context.  Here in Illinois, a modest revenue boost, even if the form of higher taxes, is certainly better for the state economy than slashing safety net programs. In New York, where the legislature dealt with a similarly large budget hole, 120 economists wrote a letter (PDF) to Gov. David Patterson citing "economic theory and historical experience" that raising taxes during a downturn is more effective at improving the economy than sharp budget cuts:

The reasons are simple. Almost every dollar that states and localities spend on aid for the needy, salaries of public employees, and other vital services enters the local economy immediately. So if states cut their spending in these areas, overall demand suffers at a time when demand is already too low and support services are most needed.

It should be said that New York's tax hike only applied to high-earners. Illinois' constitutionally-mandated flat income tax prevents similar actions. But if structured properly, a tax increase combined with targeted relief could bring in new dollars and add some fairness to the state tax code.

Image used under a Creative Commons license by Flickr user vistavision.