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Steve Winter
State Representative District 3


May 5, 2012
"Debt and taxes - Illinois"

Steven Winter represents the towns of Newbury and Sutton, Merrimack District 3, in the NH House of Representatives.

Representative Winter is a member of the House Executive Department & Administration  Committee, The Special Committee on Public Employee Pension Reform and the Joint Legislative Committee on Administrative Rules (JLCAR).

 

"Our rendezvous with reality has arrived.
– Pat Quinn, Governor of Illinois


Unfortunately, Illinois is still reality averse, according to columnist George Will. Illinois is rapidly going the way of Greece and learning one of America’s economic lessons – that freedoms in America include the freedom to fail.s

Illinois has for many years had higher taxes than its five contiguous neighbors. Nevertheless, to solve its debt problems, that state has raised taxes even more. Corporate taxes have gone up 30%, giving Illinois the fourth highest corporate taxation in the industrialized world. Personal income taxes have gone up 67%, adding over $1000 to a family of four earning $60,000. Its pension system is underfunded, requiring pensions to be paid by borrowing. The underfunding will continue as long as the state assumes a market return on pension investments of 8.5%. (The higher you assume the earnings, the less money you have to put in. But if the returns don’t materialize, you must make it up from general revenue or you fall further behind.) Illinois’ liabilities are growing more than twice as fast as tax revenues.

Twelve percent of Americans move each year, often to more hospitable economic environments. Paul Peterson, professor of Government at Harvard, says, "If states and localities attempt in a serious way to tax the rich and give money to the poor, the rich will depart while the poor will be attracted."

What has all of this to do with New Hampshire? Obviously, we were not in as dire shape as Illinois when the Republicans gained a huge control of the legislature in 2010. We are not as large a state as Illinois so our debt was not as high. But we were on a trajectory to creating a debt that was proportionally as bad. The voters, although they did not have the technical data available to them, instinctively knew that our high debt could not be sustained.

What caused our problems? All states are required to balance their budgets. As George Will says, "This is almost meaningless while the state sells bonds to pay for operating expenses." Bonding is borrowing. What bank would loan a company money for 20 years to pay for one year’s operating deficit? No bank would do that. Yet that is what our Democratic majority did to balance our budgets from 2007 to 2010. To make matters worse, the Democratic legislature included one-time stimulus money in their balancing calculations. When you get federal money to hire 100 new police officers, what happens when the money runs out? You have to fire the new policemen or raise taxes to pay for them.

With an $800,000,000 hole in our incoming budget, we knew we had to change the trajectory. Corporate taxes were too high, pensions were severely underfunded, bonding was not an option, and an income tax would change our low tax culture. Instead of raising taxes, we cut spending 11% – not from the governor’s proposed budget but from the previous budget.

It was distasteful and difficult but we had to do it – or become Illinois.

Steve Winter, Representative, Merrimack District 3
Newbury and Sutton, New Hampshire 

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Telephone:  603-271- 3125 and 271-3319
Email: libertynh@myfairpoint.net

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