By: Mark Glennon*
The January report from the Illinois Commission on Government Forecasting and Accountability shows further deterioration in total state revenues. Decreased revenues from expiration of the tax increase are now kicking in, contributing to a 9.8% drop in total state revenue for January 2015 compared to January 2014. Total revenues were declining slightly before the tax cut, however. Total revenue for the fiscal year to date (the last seven months) is down 3.9% compared to the previous year. A drop in reimbursements from the Federal government contributed to the deterioration, though state tax revenue has also declined slightly for the year.
If you want to tie state revenue to changes in tax rates, keep in mind that the effects are lagged by several years. That is, if people are encourage to leave the state or work less because of higher taxes, the results do not show up immediately. Likewise for the reverse.
*Mark Glennon is founder of WirePoints.