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For your own good: Illinois the seventh-most ‘paternalistic’ state in the country, study finds


Tuesday, January 9, 2018  |  Article  |  Vincent Caruso - Illinois Policy Institute

Taxes, misc. (89)
The Land of Lincoln is also the land of “sin” taxes, “saint” subsidies and other nanny-like policies, according to a new study.

Illinois lawmakers have a proclivity for paternalism, according to a new study from the Mercatus Center. The study, which uses a “freedom from paternalism” index, found Illinois to be one of the most paternalistic states, ranking it the seventh-most paternalistic in the country.

This is a much worse showing than that of each of Illinois’ neighbors – the closest contenders being Iowa and Michigan, the 15th– and 16th-most paternalistic, respectively, according to the study.

Paternalistic policies, defined by the study, do three things: First, they “restrict the availability of certain goods deemed harmful.” Second, they “increase the prices of undesirable behaviors or lower the prices of desirable ones.” And finally, they “mandate individuals do certain things.”

These characteristics might ring a bell for Illinoisans, who are some of the most overtaxed residents in the country. General sales taxes and targeted excise taxes contribute to this burden.
The study organized paternalistic policies across three different categories, and scored each state based on specific variables in each one. The three categories were:

•    Selective, or “sin,” taxes
•    “Saint” subsidies
•    Bans and regulations

The study pegs Illinois at the lower rungs of each category, meaning it tends more toward paternalism than other states. But it’s in the realm of sin taxes where Illinois especially stands out. Only eight states scored lower than Illinois in the sin tax area. Moreover, the Prairie State scored second-worst among neighboring states, outdone only by Kentucky.

In the sin tax category, Illinois was especially hurt by an overreliance on revenue from selective sales taxes on soda, cigarettes, beer, wine and spirits – all of the study’s variables.

Nearly 45 percent of the state’s “total sales and gross receipts tax revenue” was derived from selective excise taxes, based on 2013 data, the study found.

While the Mercatus study only takes into account state-level taxes, Illinois’ local excise taxes also contribute to the overall “sin tax” burden shouldered by taxpayers. Take Cook County’s now-repealed soda tax, for example. The subject of much fanfare, the defeat of Cook County’s “soda tax” in 2017 was a victory for taxpayers. But across the state, many other local taxes are also levied on consumption sometimes perceived to be imprudent or immoral.

The state of Illinois’ finances surely show that squeezing a fleeing tax base in lieu of controlling spending is a more reckless choice than reaching for 12 ounces of cola.

Unfortunately, sin taxes are just part of the price Illinoisans pay for the state’s paternalistic governing hand. Under the rubric of protecting consumers and preserving quality, lawmakers stifle would-be workers with costly occupational licensing regulations.

This was brought to light by a 2017 study from the Institute for Justice, or IJ. The study identified a number of occupations subject to paternalistic licensing laws, which inhibit Illinoisans in search of gainful employment. And like excise taxes, the burden of occupational licensing laws is largely regressive, meaning the lower a person falls on the income scale, the greater the pain felt.

In keeping with most paternalistic policies, the range and severity of such regulations are seemingly arbitrary. For example, the IJ study found Illinois demands that aspiring sign language interpreters pay a $900 fee, undergo four years of education, and pass two exams before obtaining a license. Meanwhile, the majority of states don’t license this profession at all. And, according to the IJ study, it takes 350 days of schooling before a cosmetologist can obtain a license, but an emergency medical technician needs fewer than 40.

Illinoisans need the state’s paternalistic hands out of their pockets and away from their shopping carts and employment proceedings.