" The state avoids junk ratings, analysts say, only because it retains the power to tax and thus, theoretically, the power to balance its books at a single confiscatory stroke."
That is THE reason that nothing changes. Illinois has-as do all of the states-unlimited taxing authority.
No matter how bad things get, the state has the authority and the ability to right the ship virtually overnight.
It may be painful as well as political suicide to do it, but if for some reason, it becomes necessary, the state can start writing in black ink at the drop of the hat.
Its untrue that they can right the ship. I live in Illinois. I live in the best school district in the state, the richest township in the state. My house is the same price now as in 1998. Everyone of my neighbors has a second house in a second state. They are moving there as soon as the taxes move up. Many have already moved. I have a neighbor who sold their house and is now renting. Many executives are working out of offices in other states so they can pay taxes there.
Yes we have the highest property taxes already. Yes we have the highest sales taxes already. And now they are going to move up the income taxes on the people who can most easily leave the sate. The bond market has it wrong or they are betting that the federal government will bail them out.
Of course we have other states and Puerto Rico who are in a similar mess. Puerto Rico needs a bail out, there is no other way. California does not understand how bad off they are. Yes there are several billionaires out there who do not mind a 11 percent tax. Remember they don’t pay anything until they sell stock. But their staff, those in the high ranks are going to leave. Microsoft, Starbucks and Amazon exist in Washington because they have no income tax.
Once the new federal tax code starts to take a bite out of the high state taxes, people are going to flee. Its going to mean tens of thousands of dollars annually here in my neighborhood. Maybe even $100,000 to those more well healed.
Then how is Illinois going to tax there way to $200 billion dollars. Thats what it is when you add in everything from the city on up. Remember they can tax more but when the economy falters, the tax revenue will fall. Detroit here we come.