Lightfoot pushes for a tax dependent budget

 

Going it alone seems to be the theme for Chicago Mayor Lori Lightfoot’s budget address on Wednesday where she has laid out a plan to address a $1.2 billion deficit for the nation’s third largest city, and in an atmosphere of tension and anxiety over the devastation that has wreaked havoc on the city’s economy from Covid; but, also one that has suffered losses in previous administrations, especially for obligated pension payments.

The biggest item is the $94 million property tax increase making the one from her predecessor, and for some dwarfs Rahm Emanuel, of $55 million but a redrafting to a federal index may reduce the pain.

Adding in the refinancing of $500 million in city debt and taking $30 million from city reserves to preserve Chicago’s bond rating makes for some intense work from Ald. Gilbert Villegas, Lightfoot’s floor leader to get 26 votes from a city council that has often been at loggerheads with her, make his work all that difficult.

The silver lining is that eliminating 1,000 vacant city jobs, along with layoffs of nearly 500 city employees, will not come till March as she hopes for a Democratic victory from Joe Biden and a changed Congress that is willing to chip in to make the city staunch its hemorrhaging of cash.

Seemingly, that is only the beginning, and as the Chicago Sun Times noted, “Declaring a record $350 million tax increment financing surplus to generate a $189 million windfall for the Chicago Public Schools, but snatching back $55 million of that money by shifting pension and crossing guards from the city to CPS,” ratchets up the criticism, that Lightfoot is bound to receive for her efforts.

Unpaid furlough days for city employees, in the thousands, that are non union, is a neat effort that preserves jobs, and is a corporate move, may garner her some points, but not much, as she will no doubt face public ire, and some from Chicago Police Department, who is already railed against her for her handling of the lootings that attended the mostly peaceful protests in the aftermath of the George Floyd murder.

450 police officer positions are also vacant, and there is sure to be political payback by Fraternal Order of Police President John Catanzara whose willingness to opine on any weakness is now standard.

There is some willingness from labor to help her identify cuts on the city payroll and Chicago Federation of Labor President Bob Reiter has promised help in identifying  where, and how, the cuts can be made, and also according to the Times, “We’re talking about identifying big money to help them close the gap in lieu of laying off or furloughing anybody. If we propose more than what they need for that, I’m happy to let them figure out where else they can help the city budget, once we get the workforce stuff under control.”

To add to the pot, the mayor has proposed an increase from a nickel to 8 cents, for a per gallon gas tax, which has raised the hackles of Chicago Teachers Union Stacy Davis Gates who said it would hit working class families, “in the middle of a pandemic when people aren't taking public transportation is tone deaf.”

The Council is the testing point, and as seen before in previous budget discussions and other proposals, she lacks the so-called “rubber stamp” of prior administrations, and already we have this: “I have concerns about the borrowing, as well as the cuts, what they’ll mean for services,” said West Side Ald. Jason Ervin, 28th, who chairs the council’s Black Caucus. “Without question, we need greater investments in violence prevention. We’re facing a difficult situation, but we need to be able to walk and chew gum at the same time.”

Labelling the property increase as “modest” might seem to be disingenuous in a city that is already taxed to death, say some, and some will say that her other efforts might not be enough. And, among them is Ald. Maria Hadden of the 49th ward who said that she wants to see more cuts and more money taken from city reserves.

Her remarks to the Chicago Tribune, “acknowledged Lightfoot’s argument about the “modest” property tax increase but said it would hurt many residents who live in apartment buildings in her ward. About 70% of her ward’s residents are renters.”

Hadden also said: “I’ve got some concerns about the property tax and the gas tax, in particular, thinking of so many of the folks who live here who would really be hit by these things.”

Lightfoot seemed optimistic and said, “Some had predicted that this budget would be predicated on hundreds of millions of new property tax dollars. Not so,and emphasized, “And for the average Chicago home valued at $250,000, you will pay just $56 additional dollars for the whole year. That’s right, just $56 new dollars per year.”

Raising taxes is not at the top of any lawmakers agenda and there are those that say, despite her optimism, that she should not propose them. And, there are some that want her to wait for a new Congress, and president, to get federal money, but as we have seen from 2016, there are surprises.

“The proposed budget calls for $185 million in property tax and revenue increases that undoubtedly will place further strain on already struggling families and businesses, particularly small businesses,” said Jack Lavin, president & CEO, Chicagoland Chamber of Commerce. “Employers and families cannot afford new taxes that will slow down business growth, which ultimately stunts hiring and impacts residents and consumers throughout Chicago,” reported WBEZ.

For a city long held with clout, there are a  myriad of contracts, and some have praised Lightfoot for taking the plunge and reviewing them for elimination, or review.

“These are literally hundreds of millions of dollars in contracts, locked up in what has effectively become hundreds of de facto sole source contracts in perpetuity,” she said.

An increase in job cuts was always on the table and “Lightfoot’s 2021 budget proposes to cut 1,921 city workers from the budget, a third of which are in the police department. This will save more than $91 million and city officials say many of those positions are already vacant. The mayor is also planning to force workers to take unpaid days off, but did not provide specifics,” they added.

Scrubbing each corner may be a long sought goal and the mayor does display some courage in even beginning to tackle this duty.

Those who have looked for a defunding of the Chicago Police may be disappointed that she has not taken sharper cuts, but she defends her actions in the interest of crafting a more diverse police force.

“If the city reduced staffing levels for rank-and-file officers, veteran officers would be given preference and the younger, more diverse class of cops would be cut, the mayor warned, the station reported.

“I am also fully aware of the complicit role that police departments dating back to our earliest times have played in brutally enforcing racist, Jim Crow laws, and depriving Black and brown people from achieving our full rights as citizens,” Lightfoot said. “But I do not believe that having fidelity to this essential work of bias-free policing requires dismantling our police department.”

Tying the property tax increase to the federal consumer price index is an idea championed by some in the past, and Lightfoot gets kudos for this effort at fair increases, but the Tribune opined that raising taxes in a city that already has property owners paying high taxes and high sales tax, and even a shopping bag tax, is this adding to the litany of woe, say critics.

Progressive council members, like Hadden will prove to be a source of pain for Lightfoot, as their agenda calls for more bread and butter deals to help those on the margins and rejects regressive tax measures (seen before by former mayor Rahm Emanuel) and pointedly said in part from an editorial from the Times: “We reject any attempt to raise revenue through regressive measures. Measures such as a property tax hike and increasing fines and fees for ticketing, towing or garbage should be reexamined in favor of more progressive options.”

Pritzker's Fair tax proposal is not fair say opponents

Illinois voters began early voting statewide Wednesday, and on the ballot is a proposal for a graduated income tax to replace the current flat tax, a campaign promise of Gov. JB Pritzker to help add  $1.2 billion to the state revenue stream, partly to fill the deficits left by pension obligations, and other indebtedness.

The proposal has received a great deal of support from the governor and progressive groups to level the playing field, so that billionaires, including Pritzker himself, pay the same amount as service workers.

Supporters also see the move as a change to economic equity and increased contributions to the local economy, by an increase in consumer spending, and to support the household budget for families and individuals to meet basic expenses, such as rent, mortgages and food.

Those in opposition, including many chamber of commerce, and mainline professional organizations see it as a job killer and a punishment for innovation, and that its passing will lessen not only economic investment, and flights to other states.

Illinois is not alone with the flat tax, currently at 4.95%, and joining it are Colorado, Indiana, North Carolina, Massachusetts and neighboring Michigan.

For some, the opposition’s labeling it as a job killer, are reminiscent of “trickle down economics” from The Reagan era’s budget director, David Stockman, who later discredited it.

California is an example of a wealthy state with a graduated income tax, and is more populous than Illinois, and has seen no mass exodus of wealthy entrepreneurs, or a brain drain resulting in diminished entrepreneurship.

For argument's sake, Forbes Magazine has noted that the richest of the 1 percent pay 38 percent of federal income tax, and  towards the bottom a healthy 47% pay nothing at all. And, that point is well taken when one considers that federal taxes are graduate, not flat.

The Chicago Tribune has noted that Pritzker’s plan has a majority of Illinois residents supporting it, and cites a ” A Paul Simon Public Policy Institute poll last February [that] found 72 percent of 1,001 registered Illinois voters backed such a change, and 76 percent supported an extra 3 percent tax on all income over $1 million a year.”

Those in opposition are predicting a doomsday scenario, including that retirement income will be taxed; a false assertion that nevertheless has hit the airwaves, in a series of television and radio ads despite a huge push from AARP stating the opposite.

A conveniently overlooked fact is that Illinois does not tax retirement income, and tax rates are not part  of the State Constitution.

While such scare tactics abound, the ballot item is a hot button issue, where the truth doesn’t lie in the middle, but rather inside the contours of self protection by many very wealthy people, including Ken Griffin, CEO of hedge fund Citadel, and a proponent and a financial contributor to fight Pritzker.

Supporters say that accepting crumbs from the table of the wealthy is not the case, and even having a table, of their own is especially worrisome in the COVID era, when so many families are working with limited funds, and face eviction, due to  job loss; and one that economic paternalism cannot protect.

Advocates have also seen this as a way towards economic redistribution, and a way to partly reduce income inequality across Illinois.

A conservative estimate, if passed, is a gain of $1.2 billion in new revenue, and without the need for more borrowing, a prediction of $5 billion, in the future, based on pre pandemic estimations.

Another goal, say supporters, is to meet the need for education funding from the 2017 reform law for school revenus, called evidence based funding, and in particular, $50 million needed for K through 12 education  to be given to low income school districts.

Those opposing say that it has nothing to do with education, but simply a move for the state to have a blank check at the ready, should a need arise, to raise taxes.

There is a huge laundry list of opposers besides Griffin, including Petco, Duchossois Group, RIchard Uihlein, of Uline office supplies, Illinois Policy Action and the Illinois Business Alliance, plus the Illinois Farm Bureau.

“The progressive tax increase is the same thing as leaving a huge bag of taxpayers’ cash at the backdoor of the statehouse and city hall,” according to Illinois Chamber of Commerce President Todd Maisch in a round table discussion in Central Illinois held  earlier this year.

Going even further is Richard Guebert, Illinois Farm Bureau president, who said, at that same meeting, “to cover all of Springfield’s spending and debt, the tax brackets and rates will have to be changed to raise taxes on the middle class and even the working poor, with higher rates starting at incomes as low as $25,000 per year . . .  the truth is that this amendment will open up every Illinoisan to tax increases.“

To be fair, Pritzker has never said that he expects the proposal would cover all state debt; but, that assertion, from his critics, shows how, in the blink of an eye, even the best intentions can quickly become political reality.

The Tribune has also noted that “Pritzker has estimated a revenue loss of $6.5 billion this budget year and next and has helped to keep the spending plan solvent with $5 billion in federal borrowing. But there is uncertainty over how to pay it back as Washington remains stalemated over giving money to state and local governments.”