An Economic Principle You Can’t Ignore

by Harvey Bluedorn

The Mercer County Board anticipates some financial pinch in the coming year.

Presuming that budget allocations are responsible and reasonable, the problem shifts to insufficient revenue.

I suggest that a tax rate increase is not the solution.

I quote briefly from an article I found on the internet.

“…[if] the government needed more revenue it would increase taxes … Government officials would get the false impression that raising taxes also raises the amount of money going into the … treasury. This false impression would take a long time to correct. Necessity, especially in politics, often occasions false hopes, false reasoning, and a system of measures correspondingly erroneous… … The most productive system of obtaining governmental revenue will always be the least burdensome.”

That quote is from Federalist Paper No. 35, published on January 5, 1788

Here in Illinois, the assessed value for the coming year on all property has increased, but a significant amount of farmland gets a sizable increase.

That actually sounds good for revenue, but not so good for property owners, and really not so good for a lot of farmers.

So we can actually expect a significant increase in revenue without any tax rate increase.

Apparently some on the county board are not satisfied that this property tax revenue windfall will be sufficient to counterbalance any decrease in other revenue and any increase in necessary expenditures.

But would a tax rate increase be the solution?

A tax rate increase is not the solution

People make decisions based on their own perceived best interests. We each have different perceptions, but this is what we do.

It you raise the tax rate, the people’s perception will be that it is less in their interest to increase or even maintain certain economic activities, and not in their interest to trust that the county is operating in their best interest. This will necessarily cause a decrease in revenue.

I suggest that the best course is to actually lower the tax rate – perhaps only a token amount at first – and all things being equal, this will have a positive economic effect, and it will actually cause an increase in revenue. Businesses will understand that it is safe to stay in Mercer, to move to Mercer, and to grow in Mercer.

As Alexander Hamilton wrote in the above quote, “The most productive system of obtaining governmental revenue will always be the least burdensome.”

1. Tax Cuts Increase Federal Revenues

“…Q: What policies would create a more robust economy?
A: Lower tax rates create better economic conditions. It’s simple: lower tax rates = more robust economy = more federal revenue….”

2. Growing out of control: property taxes put increasing burden on Illinois taxpayers

“…Property taxes are the single largest tax in Illinois, burdening residents far more than either income or sales taxes…….Property taxes are the main source of income for local governments in Illinois. …. Illinois should reduce the overall burden of property taxes to make them more affordable for average homeowners and to bring Illinois’ effective rates in line with those of other states….”

3. Lowering Taxes Would Actually Increase Tax Revenue by Daniel J. Mitchell

“For more than 30 years, I’ve been trying to educate my leftist friends about supply-side economics and the Laffer Curve. Why is it so hard for them to recognize, I endlessly wonder, that when you tax something, you get less of it? And why don’t they realize that when you tax something at high rates, the effect is even larger? And if the tax is high and the affected economic activity is sufficiently discouraged, why won’t they admit that this will have an impact on tax revenue? Don’t they understand the basic economics of supply and demand?…”

4. Will Higher Tax Rates Balance the Budget?

5. Sorry, New York Times, tax cuts sure do lead to economic growth by James Pethokoukis

“…cutting tax rates can be a pretty effective way to boost economic growth. And raising tax rates hurts economic growth….”

6. The Historical Lessons of Lower Tax Rates

NOTICE OF PUBLIC HEARINGTruth in TaxationNotice of Proposed Property Tax IncreaseFor Mercer County, Illinois

Notice of Truth in Taxation Hearing — Proposed Property Tax Increase for Mercer County Illinois


Notice of Proposed Property Tax Increase for Mercer County, Illinois

Notice is hereby given that a public hearing to receive public input on a proposed property tax increase for Mercer County for the fiscal year 2018 will be held on November 1st, 2017 at 6:00 PM at the Aledo VFW, 106 SW 3rd Ave, Aledo, Illinois.

The corporate and special purpose property taxes extended or abated for 2017 were $2,949,688. The proposed corporate and special purpose property taxes to be levied 2018 are $3,260,741. This represents a 10.55% increase over the previous year.

The property taxes extended for Public Building Commission leases for 2017 were $981,077. The estimated property taxes to be levied for Public Building Commission leases for 2018 are $1,075,253. This represents a 9.6% increase over the previous year.

The total property taxes extended or abated for 2017 were $3,930,765. The estimated total property taxes to be levied for 2018 are $4,404,493. The sum of all residential, commercial, industrial and farmland assessment represents a 12.05% increase in levied property taxes over the previous year.

Any person, or agency representative, desiring to appear at the public hearing and present testimony to the taxing district may contact County Clerk Sara Blazer at the Mercer County Clerk’s Office or by telephone (309) 582-7021 or may register their desire to appear at least 15 minutes prior to the hearing at the location of the hearing.

Time allotted for the presentation of testimony will be limited to three (3) minutes per the standard practices of the Mercer County Board.

Written testimony may also be submitted in writing to the County Clerk, and will be entered into the record of the hearing.


Special Meeting of the Mercer County Board Held Friday

The Mercer County Board held a special meeting Friday, March 27 to discuss a financial emergency. Board Chairman Brian Anseeuw says the county could run out of money in months, if not a month.

The Board listed the following financial conditions as proof of a financial emergency:

1. The Mercer County Board’s 2015 appropriations ordinance did not provide funding for: the salary of the County Engineer and other Motor Fuel Tax expenses; all of the required “step increases” in competition for represented employees in compliance with labor agreements; required payments for interest or principle reduction for the County’s operating line of credit; the likely settlement of three expired bargaining unit contracts and all costs associated with the likely settlements; and other expenses to be paid from various funds.

2. Mercer County does not maintain an unencumbered fund balance sufficient to manage county business without incurring short term debt for the purpose of maintaining County operations.

3. In recent years, including the current fiscal year, Mercer County has been unable to meet its legal and contractual obligations to make payments to creditors, including the Mercer County Public Building Commission.

4. The historic growth in the cost of labor and benefits have exceeded the economic growth of Mercer County in general, as well as the County’s legal ability or desire to raise taxes to meet the rising costs.

5. In recent years financial obligations have been funded by selling County assets or through inter-fund borrowing and transfers, which is no longer an available financial strategy.

In 2012 the County’s general fund raised $3.5 million, but it spent $4.3 million. In 2013 the general fund raised $3.9 million, but it spent $5 million.

“Over the past four years, we’ve given away a hospital, we sold a nursing home significantly undervalued, as well as an airport,” says Mercer County Board Chair Brian Anseeuw. “We’re going to seriously starting looking at each department consolidation, cutting costs, possible employee, personnel changes. We have to build our tax base. You build a tax base by getting people to move here. The way you do that is making it an easier place to live with a more efficient government, the tax burden less on that taxpayer that wants to come out here.”

The County’s financial consultant suggested that maintaining county vehicles differently can save money. “Let’s get all of the vehicles owned by the County under a service contract with a single service provider,” says Bellwether consultant Matt Sorensen.

The County is negotiating new agreements with its labor unions. Anseeuw says the County can’t afford health benefits that are currently 30 percent higher than similar counties.

At the end of Friday’s meeting, Jason Soseman thanked the board for looking out for taxpayers. “A lot of people have forgotten the taxpayers are what makes this county a good county,” he said.


New Boston Receives Grant Money

New Boston has just received a $400,000 grant, with an additional $136,000 coming. The grant comes through the Illinois Department of Natural Resources.

New Boston mayor Chris DeFrieze stated, “We are going to be receiving more than half a million in grants at no cost to the taxpayers.”

By saying that the grants are “at no cost to the taxpayers,” DeFrieze must mean that what he is doing won’t raise taxes in New Boston. Of course, the government doesn’t give out grants without first getting the money from taxpayers – including taxpayers in New Boston. By getting these grants, DeFrieze (that is, the city government of New Boston) is just getting back from the government some of their tax money. All things being equal, the more they can get back, the better.


DeFrieze and Illinois Governor Quinn


Draft of 2015 Mercer County Budget Now Available — Democrats Raise Taxes

The draft of the new 2015 Mercer County Budget has been released.

Here is a letter from Ted Pappas to the Mercer County Board members concerning this new budget:

I would like our budget to be reviewed from a cash flow standpoint by Ron Fullerlove, our sitting treasurer. I do not believe this budget reduces us borrowing money to run our county for the next twelve months. We must, as our auditors strongly suggested this past May, make real and significant cuts in spending. This 2015 budget does not accomplish this. In addition, I will not support any budget that raises any taxes to our property owners — the general corporate levy needs to be maintained at 2014 levels.

Ted Pappas Jr.
Chair, Mercer County Board Finance Committee


You Do the Math

There is no automatic property tax increase. Yet for many years — up until last year — there has been a 4.99% tax increase “automatically” in Mercer County. The 4.99% is in the law — it is the maximum that taxes can be increased without a hearing. The “automatic” is not in the law. The “automatic” has been in the policy of the majority voting on the Mercer County Board. A two-thirds majority is required to continue that policy. What changed last year? As of last year, there have been four Republicans on the ten member board. You do the math.

Harvey Bluedorn
New Boston

TABLE Mercer County Tax Rates NEW_Page_1

Mercer’s taxes not in statistical alignment with rest of Illinois

There is a direct correspondence between population density and property tax rate – Mercer County and three other counties are completely out of place.

Mercer County taxes are like those of counties in the upper third of population density. Mercer County is in the lowest fifth in population density. Mercer County shares this statistical disparity – low population density coupled with high tax rate – with only three other counties – Ford, Mason and Iroquois, which are only slightly worse “offenders” than Mercer County. (The next closest would be Schuyler County, which has almost the lowest population density in Illinois but pays taxes like counties in the upper 40 percent.)

Mercer County has about 29 persons per square mile, but it pays taxes like counties in Illinois that have roughly 65 to 140 persons per square mile. Our tax rate of 1.91 is statistically tied with Monroe (85 persons per square mile), Whiteside (85 persons), Vermillion (91 persons), and Franklin (96 persons), but our density suggests a tax rate near the range of 1.38 to 1.51. The lowest tax rate in Illinois is Hardin County (0.71).

So, for the record, Mercer County is one of the four counties with a tax rate most out of statistical alignment with the rest of the state of Illinois.

Information compiled from:
Tax Rates
List of Counties in Illinois

TABLE Mercer County Tax Rates NEW_Page_1