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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.

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Democrats raging recall war in Wisconsin

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From the leftist Washington Post.

Excerpt:

The Badger State will hold six recall elections for state senators on Tuesday, the final battle of a war between Gov. Scott Walker (R) and organized labor that began months ago. Walker’s decision to strip public-sector unions of their collective-bargaining right set off a national firestorm — with the labor movement promising retribution for legislators who voted in favor of the proposal.

[…]Democrats have targeted six Republican state senators for recall, while two of their own face recall fights. Republicans have a 19-14 majority in the chamber, so to seize control, Democrats must win three GOP-held seats and lose none of their own.Most analysts consider Sen. Dan Kapanke (R) the most endangered, because his district gave Obama more than 60 percent of the vote in 2008. Many Democrats are counting that seat as a pickup. Sen. Randy Hopper (R) also faces a tough race in a Democratic-leaning district. Sens. Luther Olsen and Alberta Darling, both Republicans, are vulnerable, too, and their races are likely to decide whether Democrats get to the majority on Tuesday.

[…]Tens of millions of dollars have poured into the state — some experts estimate that more than $30 million has been spent — as every interest group on either side of the aisle is trying to make its voice heard before the vote.

Democrats — and especially organized labor groups — have cast the Wisconsin recall elections as a sign that they retain significant political power and are more than willing to fight when they think Republicans have overreached.

This is a big story that is happening at the state level. It might be worth sending a few bucks to the Republican state senators.

News

Wisconsin Supreme Court strongly upholds Walker’s union restrictions

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Remember when that awesome Republican governor Scott Walker limited the unions from extorting massive amounts of money from the state using their collective bargaining powers? Well, some judge halted the legislation. That judge has now been overruled by the Wisconsin Supreme Court.

Here’s the story from the Milwaukee Journal-Sentinel. (H/T PJ Tatler)

Excerpt:

Acting with unusual speed, the state Supreme Court on Tuesday ordered the reinstatement of Gov. Scott Walker’s controversial plan to end most collective bargaining for tens of thousands of public workers.

The court found that a committee of lawmakers was not subject to the state’s open meetings law, and so did not violate that law when it hastily approved the collective bargaining measure in March and made it possible for the Senate to take it up. In doing so, the Supreme Court overruled a Dane County judge who had halted the legislation, ending one challenge to the law even as new challenges are likely to emerge.

The changes on collective bargaining will take effect once Secretary of State Doug La Follette arranges for official publication of the stalled bill, and the high court said there was now nothing to preclude him from doing that. La Follette did not return a call Tuesday to say when the law would be published.

[…]The court ruled that Dane County Circuit Judge Maryann Sumi’s ruling, which had held up implementation of the collective bargaining law, was in the void ab initio, Latin for invalid from the outset.”The court’s decision …is not affected by the wisdom or lack thereof evidenced in the act,” the majority wrote. “Choices about what laws represent wise public policy for the state of Wisconsin are not within the constitutional purview of the courts. The court’s task in the action for original jurisdiction that we have granted is limited to determining whether the Legislature employed a constitutionally violative process in the enactment of the act. We conclude that the Legislature did not violate the Wisconsin Constitution by the process it used.”

The court concluded that Sumi exceeded her jurisdiction, “invaded” the Legislature’s constitutional powers and erred in halting the publication and implementation of the collective bargaining law.

Ace of Spades explains what the phrase “ab initio” means.

Excerpt:

Generally, when a higher court calls bulls**t on a lower one, it’s called a remand, a declaration that the lower court got it wrong, and to try again.

Commenters are telling me the court ruled here ab initio, which (context clues, it’s been forever since I did anything law-oriented) means it’s expunged from memory altogether as being improperly entertained from the start, which means there is no remand to the lower court to try again. The higher court has said “Not only did you get this wrong, you got it so wrong we don’t trust you with another bite at the apple, so we’re directing your decision from here. It’s over. Done. Finished. Kaput.”

And more. This judge, Sumi, attempted not to rule a law unconstitutional but a bill — a not-quite-yet-a-law — unconstitutional, as she ordered the law to be unpublished, that is, to remain a bill without going to the final step to make it a law.

Ace actually brought out the flaming skull and the bear for this story… so it must be big.

Here’s some other good news from Wisconsin – they just passed a bill to legalize concealed carry. That’s good for law-abiding citizens and bad for criminals, who will now have a tougher time committing crimes.