Archive for the ‘Illinois’ Category

Illinois and California Race for the Bottom

Saturday, May 27th, 2017

It appears that Illinois and California are in a race to see which can impose the worst tax policies. The Illinois legislature is debating a “Privilege Tax;” California is debating single-payer health care. Neighboring states to each are likely envisioning plenty of businesses relocating if these measures pass.

The Illinois Privilege Tax is a proposed 20% tax on investment advisors. Let’s say I’m a hedge fund manager in Chicago and I have the Russ Fox Fund. I charge a fee for running this fund; under this proposal, 20% of the fee would be taxable to Illinois. What would prevent me from moving to Des Moines (Iowa), Indianapolis (Indiana), or Nashville (Tennessee) and running the same fund? Absolutely nothing. If this proposal passes, the financial services sector will join lots of others in fleeing the Land of Lincoln.

Meanwhile, the Bronze Golden State is debating single-payer health care. It passed a Senate Committee, but there’s a major issue: The plan would cost $400 billion (that’s “billion” with a b, not million), far more than the state’s current budget. While $200 billion of it could come from repurposing current expenditures, $200 billion would need to be raised. How about a 15% payroll tax and self-employment tax on the state level? That would make California’s tax rate 28.3% on the highest earners! The proposal would cover anyone and everyone living in California, including those here illegally.

If this passes, there’s no doubt in my mind that businesses that could would relocate to neighboring states while any freeloaders who could would move to California. The self-employed who could move would do so immediately: Live in California, pay an additional 28% in tax, or live in Las Vegas and pay 0%? Or Arizona and pay 4%? Or, well, I think you get the picture.

There aren’t many good answers on healthcare, but there are plenty of bad ones. California appears to have chosen one of those. (Yes, single-payer can work but it would have to be implemented nationally to work, not in one state.)

State Financial Health: Alaska, Dakotas on Top, Illinois, New Jersey, Massachusetts and Connecticut on the Bottom

Tuesday, July 7th, 2015

The Mercatus Center at George Mason University released a study today ranking the 50 states on their financial health. Here are the top six states:

1. Alaska (8.26)
2. North Dakota (2.97)
3. South Dakota (2.84)
4. Nebraska (2.75)
5. Florida (2.74)
6. Wyoming (2.67)

These six states have “Fiscal Condition Index” scores that are significantly higher than all the other states. Of course, where there’s good there’s also bad; here are the bottom seven states:

50. Illinois (-1.86)
49. New Jersey (-1.86)
48. Massachusetts (-1.84)
47. Connecticut (-1.83)
46. New York (-1.49)
45. Kentucky (-1.42)
44. California (-1.41)

Why are states ranked low?

High deficits and debt obligations in the forms of unfunded pensions and health care benefits continue to drive each state into fiscal peril. Each holds tens, if not hundreds, of billions of dollars in unfunded liabilities—constituting a significant risk to taxpayers in both the short and the long term.

Think unfunded pensions and you have one of the huge issues facing states. Illinois leads the way (which isn’t a good thing for the Land of Lincoln). There’s a reality: Whatever you make, spend less. Some states follow that creed; others give it lip service. California may have a “surplus,” but when you look at unfunded pensions things don’t look so good. Sooner or later, that bill will come due.

It’s an interesting analysis, and well worth your perusal.

I’m Shocked, Shocked! That a Chicago Attorney may have Committed Tax Evasion Related to Corruption

Sunday, May 31st, 2015

There’s one thing about Illinois politics: Both Democrats and Republicans tend toward corruption. After all, which of the past few governors haven’t gone to prison?

The DOJ news release on the indictment of Daniel Soso makes for interesting reading. Sure, he’s accused of not paying approximately $779,615.86 in income tax (I’m not sure how approximate that is when there are pennies in the press release, but whatever). But it’s the preceding paragraph that makes for intrigue:

The indictment alleges that in 1996, the Illinois Attorney General entered into a written contract with several law firms who represented the State of Illinois in its lawsuit against certain tobacco companies to recover, among other things, money damages incurred by the State of Illinois as a result of the sale of tobacco products to residents of the State of Illinois. In addition, the contract provided that the law firms representing the State of Illinois, including Law Firm B, would share a “contingent fee” equal to ten percent of the total monetary recovery realized by the State of Illinois in its planned lawsuit. The indictment further alleges that Soso, Individual A (an individual formerly licensed to practice in Illinois) and Individual B (a partner of Law Firm B) entered into agreements to pay Soso and Individual A a portion of the attorney fees awarded in the tobacco lawsuit and concealed these agreements from the State of Illinois, the Illinois Attorney General and others.

The Chicago Sun-Times let’s us know who they think Individual A is.

[Edward] Vrdolyak isn’t identified by name in the Soso indictment and hasn’t been charged with any wrongdoing in the case. But the indictment cites an unnamed “Individual A.” Vrdolyak is Individual A, two sources with knowledge of the case told the Chicago Sun-Times.

Mr. Vrdolyak is a former Chicago Alderman who was convicted back in 2008 in a kickback scheme and received ten months at ClubFed.

Chicago is a beautiful city–one of my favorite places in the world–but you can have both its weather and its politics.

Taxes Impacting the Giants

Tuesday, February 24th, 2015

The San Francisco Giants have been one of baseball’s more successful teams; they’re the current world champions. But they haven’t been as freewheeling in spending money as other teams. Their General Manager blames California taxes.

The top tax rate for California is 13.3%, and it kicks in at $1 million of income. As you can imagine, most major league baseball players earn far more than that. In an interview with Hank Schulman of the San Francisco Chronicle, GM Brian Sabean stated:

“To entice a free agent to come to San Francisco, we’re almost in an overpay situation, so why get involved in all those battles where you’re not going to be able to go up the totem pole money-wise?” Sabean said.

When asked to elaborate on why the Giants have to overpay, Sabean said, “You’ve got the state of California taxes.” …Asked if the high California income tax has been a problem for a while, Sabean said, “To a certain extent. Things now are getting more and more about the signing bonus, more and more about your take-home. Exponentially, when you get involved in some of those numbers, it makes a sizable difference to some.”

There’s an obvious implication here: the big spending Los Angeles Dodgers and New York Yankees have inflated their salaries to cover high state taxes. Jon Lester, this year’s biggest free agent signee, ended up with the Chicago Cubs. Illinois’ income tax is now down to 3.75%; that’s a lot lower than California. This may be good news for Cubs fans like me.

Mundane Tax Fraud Downs Friend of Cicero Town President

Monday, December 1st, 2014

George Hunter will likely be going to ClubFed. He pleaded guilty today to two counts of tax evasion. Mr. Hunter’s company received $1.8 million in two years from Cicero…without a contract. Mr. Hunter is friends with Larry Dominick, the Ton President of Cicero. Cicero is a suburb of Chicago. The Chicago Sun-Times article notes that Mr. Hunter has refused to cooperate with federal prosecutors.

As for the tax evasion, it’s pretty mundane. Mr. Hunter paid his employees in cash and told his employees not to report their income to the IRS. He didn’t, and not paying payroll taxes is a major issue with the IRS. He also failed to file a 2008 tax return when he allegedly made $655,000. Mr. Hunter originally said the charges were brought because he refused to cooperate with authorities. No matter, the charges apparently were true. He’ll be sentenced in March.

Corruption in Chicago? Who would’ve thunk it!

Since the Dead Vote, Why Can’t They Get Tax Exemptions?

Sunday, November 9th, 2014

I grew up in Chicago. It’s legendary in Chicago that the dead vote. My father told me that during the 1960 presidential election that Democrats waited to see how many of the dead they needed to vote to ensure that John F. Kennedy won Illinois over Republican Richard Nixon (I can’t vouch for the veracity of that story).

It seems that the voting dead in Chicago also want senior property tax exemptions. In Cook County if you are over 65 and have a limited income (under $55,000), you qualify for a senior exemption. Well, since the dead can’t take it with them (or so I’ve been told) they’re apparently being generous to the living.

Cook County has begun to make sure that seniors are truly alive when taking the exemption. They’re combing the Social Security death list (this is a very legitimate use of that list) and have a contract with LexisNexis to find the living dead. Zombies aren’t eligible for that tax exemption. To date, they’ve discovered 3,809 cases representing $6.2 million of improper exemptions.

It looks like the living dead are on borrowed time in Cook County for this exemption.

Bears Sacked; Lose Court Case Worth $4.1 Million

Monday, August 11th, 2014

No, Jay Cutler didn’t throw one of his usual interceptions. Instead, Judge Mary Mason of the 1st District Illinois Appellate Court ruled that the Chicago Bears had underpaid Cook County’s Amusement Tax.

The story begins when ancient Soldier Field was rebuilt in 2002 – 2003. The stadium was completely rebuilt, with premium suites added. Those suites are the subject of the dispute.

In 2007, the Cook County Revenue Department audited the Bears. The Bears priced the tickets for the seats in the suites at $104 per game. However, the suite rents for more than 100 times that. As the Chicago Tribune reported,

But Mason took the Bears to task for the $104 value the team put on a seat in a luxury suite. If the average rent for a suite is $150,000, the judge said the suite holder paid about $15,000 per game, including eight regular season and two preseason games. Dividing that figure by 20 seats yields a per-ticket price of $750.

The Bears added various fees and non-amusement services to each ticket. Judge Mason’s ruling noted that these should be subject to the amusement tax:

The absurdity of excluding the vast majority of ticket revenues from the amusement tax when the generation of those revenues is driven by fans’ desire for the ‘privileges’ associated with premium seats renders the Bears’ position untenable.

The Bears can appeal to the Illinois Supreme Court.

It’s Only a 56% Tax Increase…

Sunday, June 8th, 2014

In the, “Tales, I win, heads, you lose” news of the week comes word of a 56% increase in Chicago’s telephone tax. The tax increase might prevent a $50 million property tax increase…but then again it might not.

The issues all stem from the problems with pensions in Chicago and Illinois. For those who aren’t familiar with the issues, Illinois is so far underwater on pensions that the state is in even worse shape that California. Chicago city pensions are in a similar situation–badly unfunded.

I’ll let the Chicago Sun Times tell a little of the story:

Instead of asking the Illinois General Assembly to simply renew a $2.50-a-month surcharge on telephone bills due to expire July 1, cash-strapped Chicago seized the opportunity to get more money — by persuading state lawmakers to raise the cap to “the highest monthly wireline surcharge imposed by any county or municipality” in Illinois.

That means Chicago can go up to $3.90, and increase a transaction fee on prepaid cellphones from 7% to 9%. The tax increase overall is expected to bring in $50.4 million. Earlier, Chicago’s city council passed a $250 million property tax increase ($50 million a year for five years); the phone tax increase will bring in enough money to possibly stop the first year of the property tax increase. Of course, there’s no guarantee that the Board of Aldermen (the official name of Chicago’s city council) and Mayor Rahm Emanuel will actually stop a tax increase.

Perhaps the city might look at cutting costs, too. Perhaps I’m also dreaming….

Illinois’ Bankrupt Pension Systems and Tax Hikes

Thursday, October 31st, 2013

I was born and raised just outside of Chicago. I still root for Chicago sports teams (Blackhawks, Bears, and Cubs). Yet I’m quite happy that I don’t reside in Illinois today. Illinois’ pension systems are basically bankrupt and Democrats in the Illinois legislature have but one solution: tax hikes.

The Illinois Policy Institute has a research report noting that taxpayer contributions to state pension funds have skyrocketed. But didn’t Illinois pass a tax increase in 2011 that would “solve” the state’s budget woes? Yes, such a tax increase passed; no, the budget woes haven’t vanished.

Unfortunately, the Democrats in the Land of Lincoln have a proposal that will solve the problems: more tax hikes! State Representative Naomi Jakobsson has introduced HJRCA0033 which would make Illinois’ state income tax progressive, with a top rate of 9%. The state’s rate would be 4% at just $18,000 of income (the state’s tax rate is supposed to be just 3.75% in 2015). .As the Illinois Policy Institute noted, this will hurt the working and middle classes hard.

The only true solution is to attack the cause of the problems. That means pensions and state spending in Illinois will need to drop drastically. That’s not likely to happen until the voters force it upon Springfield.

The Flow of AGI from One State to Another

Saturday, July 20th, 2013

From comes an interesting interactive map showing how money has flowed from state to state. Back when I moved to Nevada from California, I noted this issue. Here’s yet more verification that this is real.

The five biggest losers were:
1. New York ($68.10 billion in annual Adjusted Gross Income (AGI))
2. California ($45.27 billion in annual AGI)
3. Illinois ($29.27 billion in annual AGI)
4. New Jersey ($20.62 billion in annual AGI)
5. Ohio ($18.39 billion in annual AGI)

The five biggest winners were:
1. Florida ($95.61 billion in annual AGI)
2. Arizona ($28.30 billion in annual AGI)
3. North Carolina ($25.12 billion in annual AGI)
4. Texas ($24.94 billion in annual AGI)
5. Nevada ($18.17 billion in annual AGI)

Sure, some of this is retirees moving from the snow belt to the sun belt. But California is anything but part of the snow belt; it’s clear that successful individuals are fleeing high tax states for low tax states. We here in Nevada are appreciative of the $9.59 billion in annual AGI that has moved from the Bronze Golden State to the Silver State.

Interestingly, the interactive map allows you to look county-by-county. The areas that one would think would show AGI growth are losing AGI. The area around Silicon Valley has lost AGI; so have Los Angeles and Orange County. Sure, some of this is retirees moving to the desert (Riverside County, which includes Palm Springs, showed an increase in AGI). However, there is no chance that this is just caused by retirees.

Taxes matter, and individuals absolutely do relocate because of taxes.