Illinois politicians must be careful about tax policy as they consider ways to close the multi-billion-dollar budget deficit, an economist says. Pension promises were ignored for decades; dealing with them now has given us an income tax increase and an environment that’s not good for the business sector, says William Testa of the Federal Reserve Bank of Chicago.
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“Now [that] the chickens have come home to roost, it’s going to flip-flop into a situation where there are going to be real penalties on our households and our businesses going forward. We don’t know who’s gonna pay or how much, which creates an air of uncertainty, certainly, and nothing chills investment more than uncertainty,” he said. He says when politicians consider taxes, they should look at taxing people or things that won’t move away. He says businesses are not quick to move, but they will make investment decisions over time that take tax policy into account.