Tag Archives: Tax Increases

News

Caterpillar decides to not build its new manufacturing plant in Illinois

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Central United States
Central United States

From the Peoria Journal Star.

Excerpt:

Caterpillar Inc. will not be building its new North American plant anywhere in the state of Illinois, officials with the company told local leaders Tuesday, with part of the reason being continued concerns about the business climate in the state.

The company will instead focus on a location closer to its division headquarters in Cary, N.C., Peoria County officials were told in an email sent to them shortly after the close of business and later obtained by the Journal Star. The plant stood to bring with it from Japan roughly 1,000 jobs manufacturing track-type tractors and mini hydraulic excavators.

Peoria County had submitted a regional proposal for the facility at the end of last year, and the Galesburg area also had a proposal on the table for the manufacturer. Peoria’s proposal reportedly included economic incentives as well as a promise of a legislative effort to establish a tax increment financing district to benefit the company.

At its core, Caterpillar’s decision reflects some concerns its officials had previously expressed about the economic condition of the Land of Lincoln.

“Please understand that even if your community had the right logistics for this project, Caterpillar’s previously documented concerns about the business climate and overall fiscal health of the state of Illinois still would have made it unpractical for us to select your community for this project,” the letter reads in part. “Caterpillar intends to continue calling for long-term changes in Illinois and to offer help to the state as it works toward real and fundamental reforms that will position communities like yours to compete for future projects.”

And:

Still, the rejection didn’t come as much of a surprise to state Rep. David Leitch, R-Peoria.

“I think Caterpillar has been very frustrated by the state’s inability to improve the business climate,” he said. “I still think that workers’ comp is a very serious issue for Caterpillar and others. I think there’s great concern about the financial situation within the state itself. The precarious nature of the state’s finances and having the worst bond rating in the country and huge liabilities … have not been addressed.”

The decision to locate elsewhere — and the reasons for it — should serve as a wake-up call to the region and the state as a whole, Rand said.

“I think the lessons learned here shouldn’t read like recriminations but instead resonate like a call to action,” he said. “Perhaps someone in Springfield will take notice. It’s our job to make certain they do.

“You can’t move a mountain while wearing a pair of roller skates. The disadvantages Cat identifies in Illinois are all man-made. We have to make ourselves competitive. It won’t happen because of a wish.”

Illinois is one of the bluest states in the union – totally dominated by Democrats. It’s very important for working Americans to understand that a Democrat can stand up and complain about outsourcing and greed and corporations and income inequality until they are blue in the face. It doesn’t mean a thing. Democrats are for higher taxes and more regulations on businesses, and that’s what causes outsourcing. Democrats cause unemployment. It doesn’t matter what they say. What matters is how job creators respond to the incentives created by Democrat policies.

Commentary

How well did Obama-style tax hikes on the rich work for Illinois?

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Central United States
Central United States

From the Wall Street Journal.

Excerpt:

Run up spending and debt, raise taxes in the naming of balancing the budget, but then watch as deficits rise and your credit-rating falls anyway. That’s been the sad pattern in Europe, and now it’s hitting that mecca of tax-and-spend government known as Illinois.

Though too few noticed, this month Moody’s downgraded Illinois state debt to A2 from A1, the lowest among the 50 states. That’s worse even than California. The state’s cost of borrowing for $800 million of new 10-year general obligation bonds rose to 3.1%—which is 110 basis points higher than the 2% on top-rated 10-year bonds of more financially secure states.

This wasn’t supposed to happen. Only a year ago, Governor Pat Quinn and his fellow Democrats raised individual income taxes by 67% and the corporate tax rate by 46%. They did it to raise $7 billion in revenue, as the Governor put it, to “get Illinois back on fiscal sound footing” and improve the state’s credit rating.

So much for that. In its downgrade statement, Moody’s panned Illinois lawmakers for “a legislative session in which the state took no steps to implement lasting solutions to its severe pension underfunding or to its chronic bill payment delays.” An analysis by Bloomberg finds that the assets in the pension fund will only cover “45% of projected liabilities, the least of any state.” And—no surprise—in part because the tax increases have caused companies to leave Illinois, the state budget office confesses that as of this month the state still has $6.8 billion in unpaid bills and unaddressed obligations.

It’s worth contrasting this grim picture with that of Wisconsin north of the border. Last winter Madison was occupied by thousands of union protesters trying to bully legislators to defeat Republican Governor Scott Walker’s plan to require government workers to pay a larger share of their health-plan costs, and to shore up the pension system by trimming future retirement liabilities. The reforms passed anyway.

In contrast to the Illinois downgrade, Moody’s has praised Mr. Walker’s budget as “credit positive for Wisconsin,” adding that the money-saving reforms bring “the state’s finances closer to a structural budgetary balance.” As a result, Wisconsin jumped in Chief Executive magazine’s 2011 ranking of each state’s business climate—moving to 17th from 41st. Illinois dropped to 48th from 45th as ranked by the nation’s top CEOs.

And in Ohio, Republican Governor John Kasich also saw success.

Excerpt:

Ohio’s new fiscal responsibility is getting noticed and rewarded.

Standard & Poor’s upgraded the state’s credit forecast from “negative” to “stable,” in time for a $417 million bond sale last week to refinance at a lower interest rate and restructure debt.

Ohio’s lean budget will pay off with lower costs for borrowing, saving taxpayers as much as $1 million or more over the course of a year, according to the state’s Office of Budget and Management. It’s like having a credit-card company lower its annual percentage rate: The borrower can either accelerate the payoff or spend the savings elsewhere.

So essentially, cutting state programs spared money for state programs.

This is vindication for the Kasich administration. When Gov. John Kasich took office this year, the state was $8 billion in the hole and its rainy-day fund totaled $1.78. That’s not a typo; Ohio barely had enough in the bank to buy itself a cup of coffee. A small one.

[…]Investors pay attention to these ratings, especially since Ohio stands out as other states continue to struggle. “There are a lot of jitters in the credit market; I can’t imagine it won’t be helpful,” said Robin Prunty, primary credit analyst with Standard & Poor’s.

[…]Most states still are struggling with the economic recovery and phasing out one-time money from the federal stimulus program that Kasich’s predecessor used to paper over the deficit. S&P’s revised outlook reflects its view that Ohio’s economy “is steadily recovering.”

“The outlook revision reflects the state’s progress in moving toward structural budget balance through fiscal 2013 and the modest economic recovery under way,” its report says.

Republican tax policies work, and Democrat policies don’t. Taxing the rich sounds good, but it doesn’t help the poor. To help the poor, we need to encourage people with capital to risk it by engaging in enterprises for profit. That is what causes workers to be hired and wealth to be created – forming valuable products and services through ingenuity and labor.  Workers who build skills and experience while working have more confidence and can be more productive, making them more free because they can succeed independently of government handouts.

News

How Obama’s tax increases affect private charity and non-profit organizations

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The Washington Examiner takes a closer look at President Obama’s latest stimulus bill.

Excerpt:

A significant portion – $400 billion over 10 years – of President Obama’s jobs bill is apparently funded through the limitation of itemized deductions for the “wealthy.”

This proposal would create a perfecta of unintended public policy consequences.

First, taxes for wealthy philanthropists would go up while taxes for wealthy Scrooges, those who make no charitable contributions, would remain virtually the same.

Second, if the philanthropists decide to reduce their philanthropy because of the additional taxes due, charities would have less revenues and would need to contract their charitable missions. Not good.

Over the years, the Internal Revenue Code has been amended and amended again. These amendments have severely reduced or eliminated the availability of most itemized deductions for the “wealthy.”

The article explains how the current tax code limits the wealthy from claiming most tax credits that are available to lower and middle income earners. The only tax credits that the wealthy can use are the mortgage interest deduction and the charity deduction. Whatever taxes that Obama wants to raise before he can raise the income tax brackets will have to come out of those two credits.

The article continues:

The home mortgage deduction is currently limited to the interest on a $1 million mortgage. With interest rates at 5% or so, the maximum tax increase related to home interest for any individual taxpayer from the proposed limitation on itemized deductions would approximate only $3500.

Therefore, the expected increase of $40 billion dollars a year in federal revenues for the next decade must be funded from “wealthy” individuals losing a portion of their itemized tax deduction resulting from their charitable contributions.

Consequently, we get to this unusual social result. If a “wealthy” philanthropist donates $1 million dollars to the Red Cross in 2012 and then does so again in 2013, his or her taxes would increase by $70,000 in 2013 over 2012.

If the “wealthy” next-door neighbor, Scrooge, made no charitable donations in 2012 and continued that pattern in 2013, Scrooge’s taxes would not increase in 2013. Now there is a piece of public policy – let’s raise taxes only on the good guys!

Most ‘wealthy’ individuals donate to charity only after determining how much they can afford in after-tax dollars. One has to think that the practical result here is that many, if not most, “wealthy” taxpayers would reduce their contributions to achieve the same after-tax cost of their charity.

So, by raising the taxes on the “wealthy” philanthropist, the proposed bill would very likely punish the poor by reducing the funds received by the local food bank etc. as large charitable donations decline. It is odd public policy, in troubled times, to propose a jobs bill that would hurt charities and therefore the poor.

This policy of Obama’s will result in a massive cut in funding for private charities and non-profits, including churches. Including churches. But that is exactly what a secular leftist like Obama wants. The state has to be everything, and all rivals to the state must fade away. The family has to be destroyed, and the church, too.