When states go broke, lawmakers’ go-to solution is to increase revenue instead of cutting spending.
One of the perks of being an elected official is that you get to claim all new spending is meant to benefit constituents while any cuts that may affect social services are seen as detrimental. To guarantee reelections, these lawmakers know that the key to success is to keep spending, whether the consequences of this irresponsible policy will hurt the next generations or not.
Illinois has a budget issue, and to “close the gap” lawmakers want to require corporations doing business in the state to pay taxes on all profits earned in offshore tax havens.
Targeting 48 countries, lawmakers hope to make an additional $343 million in additional corporate tax revenue per year. Others say Illinois could bring in up to $1 billion annually thanks to this new tax law. But regardless of how much more money the new law brings in, the reality is that companies who could be impacted by this change are not going to let state-sponsored theft go unchecked. Instead of staying and paying through the nose for the privilege of doing business in Illinois, they will simply move.
Oregon is a great example.
After five years of extortion, the state’s worldwide reporting law was repealed in 2018. At the time, lawmakers noticed companies were simply shifting things around to protect their money and investments. In the end, the state was not collecting what it hoped.
While some are now pressuring Oregon lawmakers to reconsider this move, the reality is that this type of tax law scares business away. And if government’s goal is to force all investment and job creation out of the state, then imposing a penalty on companies making profits abroad is the surest way of getting the job done.
But what would it really take to fix Illinois’ budgetary problems without destroying the state’s economy?
The Libertarian Solution To The Budget Problem
Unfortunately, it’s not always easy to get elected for office if you’re 100 percent honest to the electorate. That’s because many voters go to the polls with one goal in mind, and that is to vote for the candidate who promises to continue giving him the benefits he’s received so far, or who’s going to, at least, make him more likely to get benefits once elected.
In the case of Illinois, or any other state suffering budgetary concerns, the reality is that lying to residents about the future may sound good to guarantee them votes, but it doesn’t help people in the long run. And that’s because any promise made by an official will have to be backed by money acquired through taxation. And any additional need for taxes will have to be met by forcing people to give the state more of their earnings — directly or otherwise.
In the case of a worldwide reporting law, working families are hurt because businesses either flee or rethink their investments to avoid additional taxes. As the legislature notices the earnings aren’t what they were hoping for, they come up with more ways to increase taxes everywhere, therefore hurting other members of the local economy.
The only way to completely walk away from all this is to dismantle the very system that allows this type of predatory policy to take root.
First and foremost, those with an interest in making the state economically healthy must educate their fellow residents about the importance of putting an end to the spending. Cutting government programs might hurt at first, but as they are broken down one by one, taxes will then be obsolete, as they will no longer be required to cover for any gap.
In no time, entrepreneurs will begin opening businesses thanks to the new, friendly environment, and other businesses that fled the state will come back. Private charities will also flourish, as they won’t be suffocated by government regulations.
In other words, whenever government runs out of people’s money, it reaches a dead end. So it’s important to note that freedom from government is the only way for the people to regain their autonomy. More government mandates, taxes, or regulations will do nothing but diminish the people’s chances of reaching their full potential.