subject: Beware Of Government Solutions For The Economy [print this page] It was another good news bad news weekIt was another good news bad news week. The good news is that the local real estate market is as hot as it has been in almost two years. Closed home sales are nearly even with 2008 year to date, sales pending are running 21% ahead of last year on this date, prices remain affordable, and there are 15% fewer homes listed for sale than last year on this date. Interest rates remain near historic lows, and the first time home buyer tax credit is in place for a few more weeks.
The bad news is the economic news is awful, and the plans to help fix the economy are worse. This is important because going forward jobs will be the key to how our housing market performs. The more jobs the more buyers there will be, and the fewer the jobs the fewer the home buyers.
Unemployment jumped in September to 10.5%, compared to 6.7% last year in Illinois. Geoffrey Hewings of the Regional Economics Laboratory at the University of Illinois reported the numbers don't count those who have stopped looking and have given up. When counted the real unemployment number is 12.5% in Illinois.
Foreclosures were the highest on record in the third quarter across the nation, and in Illinois foreclosures were up 30.3% from last year, and with 1 in every 141 housing units foreclosed, places 10th in the U.S. Three hundred sixty thousand people have lost their jobs in Illinois the past 12 months.
The state of Illinois reported revenues were down $340 million in the first fiscal quarter due to declining income tax and sales tax receipts. What is the state doing? In the veto session, nothing, it takes a super majority to pass budget items. What does governor Quinn propose ? Going back to the legislature in the spring for a tax hike of 50% on the personal income tax, and corporate tax. Only a simple majority will be needed to hike your taxes after the primary in February.
Quinn's opponent Dan Hynes wants a progressive tax amendment placed on the ballot while promising he will not raise taxes on anyone earning under $200,000 a year. Sound familiar? We see how that has been working at the federal level with deficit spending of $1.4 trillion and revenues falling like a rock. Here are some examples from other states on taxes.
New york passed a tax on the wealthy, it begins at $200,000 annual income. Revenues are running 20% below projections, and people are leaving the state.
New Jersey raised taxes and revenues are running so far below projections they cut $3 billion from the budget after receiving $2 billion in Stimulus money, and skipped making payments to their pension system.
In Maryland they passed a millionaires tax. In 2007 there were 3000 returns for people who earned a million dollars. In 2008 that number fell 33.3% to two thousand, and had to make mid year budget cuts because revenues this year are running $650 million below projections. How many moved out of the state?
California has raised income and sales taxes, are running an over forty billion dollar deficit, and have people leaving the state in droves seeking better tax environments like Nevada (who is advertising in California).
In Indiana they CUT taxes and are now running a billion dollar surplus.
When will politicians like Quinn and Hynes learn, higher taxes are a burden upon small businesses who create 70% of new jobs in the economy? The Tax Federation reports 2/3rds of the highest bracket taxpayers report their income from businesses. It's simple, the more people working the more revenue the state will receive. When small businesses have their taxes increased, will they have more or less money to make new hires? Ask Indiana. When has the amount of revenue projected to be raised by an income tax increase ever materialized?
These are very nervous economic times in Illinois, and the U.S. Nothing the Obama administration has done has helped create jobs except in government. Unemployment continues to rise in spite of economists declaring the recession over. Ask the fifteen million people who have lost their jobs if they think the recession is over, or if the Stimulus plan has worked (over 4 million have lost jobs since the stimulus was passed)?
Ask the American family if they think increasing their costs of living by passing a health care reform plan, and cap and trade bill during these economic times is a good idea? According to studies the trillion dollar health care plan could cost families up to $4,000 a year in higher premiums, fines, and penalties under forced insurance. The Department of Treasury estimates the cost of energy and food will go up $1700 a year per family if Cap and Trade passes. What will happen to consumer spending and consumer confidence if these two bills pass?
We can be as positive as we want, work as hard as we want, but the truth is the government causes more problems than it fixes. The stimulus is a failure, and raising taxes only makes the economy worse. The cure the government proposes (raise taxes/deficit spend) is worse than the disease (politically exaggerated crisis like health care/climate change).
My advice? If you ever wanted to buy or sell a home, now is the time. Better hurry before the governement has time to fix anything else!
by: Fritz Pfister
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