“You don’t raise taxes during a recession…. The last thing you want to do is raise taxes in the middle of the recession because that would just suck up and take more demand out of the economy and put businesses in a further hole.”
-Barack Obama, 2011
By: Mark Glennon*
This isn’t complicated.
Illinois is in its worst economic downturn since the Great Depression. What happens if Illinois voters approve the progressive income tax amendment to the Illinois Constitution that’s on the November ballot?
A $3.6 billion tax increase, which is exactly what Obama said not to do in times like this.
Springfield has already passed the tax increase on high earners that will go into effect on January 1 if Illinoisans vote ‘yes.’ Lower earners would get a tiny tax reduction, if anything. On balance, it would raise taxes by $3.6 billion, supporters say.
Obama was right, and virtually all economists agree. It’s in all the economics textbooks: You don’t raise taxes during a recession.
More recently, the same point was made accidentally by no less than 1IL, which is a progressive publication that supports the progressive tax increase.
Last month, 1IL made its case for why the federal government should provide more money for mass transit spending. “Increase spending and cut taxes in times of crisis, the better to minimize the damage and spur a recovery,” they wrote. “It couldn’t make more common sense.” [Emphasis added.]
That, too, is just basic economics about. Illinois, of course, doesn’t have the option of doing the rest of what 1IL suggested, which is more spending and using rainy day money. Illinois can’t deficit spend like the federal government can, and Illinois entered this crisis with zero rainy day money. In January, just before the pandemic began, the Tax Foundation ranked Illinois the very worst among the fifty states in being prepared for a recession, having no reserves whatsoever.
So, all together now. Say it with Barack Obama: You don’t raise taxes during a recession.
*Mark Glennon is founder of Wirepoints.