Illinois's Record Income-Tax Increase Divides Businesses and Investors - Bloomberg

Illinois's Record Income-Tax Increase Divides Businesses and Investors - Bloomberg

Illinois lawmakers have been hotly criticized for recently passed income tax increases. This action points to the struggles that all states are having with their budgets...it's not just Illinois. What does this mean to you?

I think you can expect that the bond market will continue to struggle. Downward pressure on valuations, upward pressure on yields and increased future borrowing costs for states and other governmental entities. You need to assess how this impact your asset allocation and tax strategies associated with owning tax exempt bonds.

Taxpayers who have tax overpayments and are asking for refunds should expect to wait for their money. As with prior years, the states have used refunds due to taxpayers as a convenient borrowing source. Taxpayers should expect that a number of states will announce (or maybe not announce) delays in processing and paying refunds to businesses and individuals.

Taxpayers should expect more inquiries from states related to deductions and credits claimed on their tax returns. Examining returns that claim tax benefits allows the states to potentially reduce refunds claimed. Additionally, it allows states to delay when those refunds are paid.