This week Illinois passed monumental (in a bad way) legislation to increase income taxes on their residents by 66%.

On Wednesday, Illinois’ Legislature increased their individual income tax rate from a trim 3% to 5% – still lower than Missouri, but a significant increase on the backs of Illinois taxpayers who already pay significantly through other taxes, like gas, sales and property. Before Wednesday, Illinois had the lowest income tax of any state that collects one.

While lawmakers insist the increase is only temporary, few actually believe that Illinois will be able to sever such a juicy source of revenue. Indiana, Michigan and Wisconsin have all started catcalling to Illinois businesses and even Chicago’s Mayor Daley believes the state will lose people and businesses with little notice:

“Businesses don’t have press conferences like this and announce they’re moving 50 people out, 60 people out, 70 people,” said Daley.

It also means that businesses won’t be in a position to create new jobs, like True Value Hardware owner Bill Ecton:

“If I have to pay more to the state, it’s money that I can’t pay out in wages,” Ecton said. “I’m not saying I’m laying people off, but maybe I’m going to look twice at adding another one.”

Illinois is precipitating what many fear is a cascade of states with budget crises. How states may raise revenue is a question that Missouri, along with many other states, will be grappling with in the next couple of years. But equally as critical to a state’s economic health is how responsibly that revenue is spent. Meredith Whitney – who famously predicted the financial collapse of ’08 – talked to 60 Minutes recently about state budget woes.

This is a lesson that most of us have learned the easy or the hard way: you can’t spend more than you make forever. It will catch up to you eventually, and when it does it could wreak serious havoc on your goals and stability.

Illinois lawmakers have decided to answer their out-of-control spending by shifting much of the burden to taxpayers. An income tax increase, though, will cost the state jobs and economic activity for the fleeting, false idol of revenue.