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.”
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