Here’s an update to an earlier piece on Illinois’ race to become France. Not to knock our Norman cousins, but they’re not exactly known for their pro-growth policies. Multiply the worst of our unemployment rate since 2008 and sustain it for roughly three decades and you’ll have an idea of France’s stagnant predicament. The “solution” is always the same and the very definition of insanity—an increase in regulation and decrease in production.
Sound familiar? It should. Anyone following the situation in the great state of Illinois, which we detailed in March, knows of its penchant for doubling (tripling) down on similarly bad ideas. The answer from Springfield sovereigns for bloated pension debt that threatens the fiscal solvency of the entire Prairie State budget is, of course, higher taxes. This time they’re targeting the sector with the expertise and wherewithal to help—investment advisers.
Colloquially known as the privilege tax (which tells you everything you need to know about proponents’ moral preening), the new bill “would put a 20 percent levy on fees earned by investment advisers. It passed the state Senate in a 32-24 vote Tuesday, and backers are hoping to get it through the House before the legislative session ends May 31,” The Wall Street Journal reports.
It’s pitched as a way to grab more cash from hedge funds and private-equity firms and the so-called “carried interest loophole,” and could total as much as much as $1.7 billion a year.
“But under the current version of the bill, Illinois would keep collecting the privilege tax even if Congress were to cease taxing carried interest at the lower capital-gains rate,” the Journal adds.
Legislators are learning from past incompetence, hip to the mistakes of their blue-state brethren a generation ago. After serious hikes in corporate rates, citizens of shared-border (and ideologically opposed) states typically benefited from the decampment that followed.
However, proponents of the Illinois bill are banking on multi-state agreements to prevent financial firms from heading for, as the paper notes, “friendlier climes.” So not only will they tax wealth and the advisors who manage it, they’ll prevent firms and their clients from availing themselves of competitive advantages that come from relocation. The Illinois bill is so poorly structured as it stands that it’ll also possibly tax income already properly taxed in neighboring states.
Say what you will about tax fairness, economic justice or any other trite term too often seen today, but does any of this sound like a recipe for success? Sadly, Illinois is destined for more of the same.