A classic economic principle teaches that if you tax something, you get less of it, or if you subsidize something, you get more of it. Sadly, too often social policies are designed in this manner to tax productive economic activity and subsidize crippling poverty — harming the most vulnerable. Our latest example of this comes from America’s heartland: Illinois.
In March 2021, Illinois slapped an all-in interest-rate cap of 36 percent annually for loans under $40,000 from non-bank and non-credit-union lenders. These loans are sometimes called “installment loans” or a derogatory phrase, “payday loans.”
Although these types of financial services are sometimes criticized, people rely on them in a high-tech economy where otherwise they would depend on underground avenues like the black market.
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