Executive Director Reports

Who's really "overtaxed"?

Henry Bayer
Executive Director

April-May 2014

I am overtaxed. Well, not me exactly, but my patience.

The state has a backlog of unpaid bills and an even bigger backlog of unmet needs: roads that need repair, schools that need help, public safety that needs improvement, and more assistance for the elderly and people with disabilities.

Yet we have a lot of politicians and editorial writers insisting that the answer to the state’s problems is to cut income taxes.

That’s like telling someone steeped in debt with a leaky roof and a kid in college to cut their income.

The ridiculousness of their claims reached new heights in response to House Speaker Michael Madigan’s proposed tax surcharge of 3 percent on annual incomes of more than $1 million.

The anti-taxers’ said this would lead to a “millionaire migration” as rich folks left the state to avoid paying their fair share.

There’s no evidence to back that prediction.

To the contrary, a study done of New Jersey when the state raised its top tax rate to nearly 9 percent on incomes over $500,000 found that the number of millionaires actually grew after the tax took effect.

Other studies have demonstrated that tax policy has little bearing on mobility. In reality, jobs, family, housing and climate are key factors in the decision to move from one state to another.

But facts are something the anti-taxers assiduously avoid because the facts just aren’t on their side.

Opponents of fairer taxes consistently claim that the Illinois income tax puts us at a competitive disadvantage with our neighbors. Yet even at its current level of 5 percent, the top Illinois income tax rate is less than that of Iowa, Kentucky, Missouri and Wisconsin, where the right wing’s demi-god, Scott Walker, reigns.

In fact, at 3 percent, Illinois had the lowest top marginal tax rate in the country. If we left it at its current 5 percent level, we would be tied for 10th lowest.

The anti-taxers also like to claim Illinois has a spending problem, but don’t mention that when it comes to per capita state general fund expenditures, the Land of Lincoln is in the bottom half, 28th to be exact.

Wisconsin, Walker’s Wonderland, ranks well above us at 15th in spending. Even Indiana, which Bruce Rauner wants us to emulate, ranks higher than Illinois at 25th..

To sum up, Illinois’ tax rate on its highest income residents is lower than those of most of our neighbors, and we spend less per capita than bordering states. The naysayers ignore these statistics because they belie their claims.

Yet while the state is not profligate in its spending and its income taxes are on the low end, our tax structure places its heaviest burden on low and moderate income families. The poorest among us pay, proportionally, almost three times more of their income, and middle income folks pay twice as much of theirs than the wealthiest individuals.

There is a plan to undo this unfairness. It would charge people with higher incomes (above $150,000 annually) more while the overwhelming majority (94 percent of Illinois families) would pay less than they do now. This should make the anti-taxers happy.

But putting it into effect requires amending the state constitution, which now only allows a flat tax with the poor and the wealthy paying at the same rate.

Amending the constitution requires a direct vote by the electorate. But in order for the question to be put before the voters in November, 3/5 of state legislators have to approve putting it on the ballot. A legislator doesn’t need to be in favor of a fair income tax, only willing to allow voters to express their wishes on the issue.

Many of those same politicians say they don’t want to cut spending for education, that they’re concerned about the elderly and veterans. The fair tax would provide revenue for both kids and seniors.

Other politicians claim they want to reopen shuttered prisons and mental health centers. A fair tax would provide money for that, too.

Illinois has a huge budget hole that can’t be filled with hot air and phony rhetoric. It takes real dollars and those dollars should come from those who can best afford it. A fair tax would do just that.

Bruce Rauner, the Republican gubernatorial nominee, is leading the charge for tax cuts – and strongly opposes higher taxes on billionaires like him.

At the same time, he’s going around making speeches about the need to spend more money on education, from pre-kindergarten all the way to college. So far his only plan to raise the revenues needed to pay for such programs is to cut the pay and eliminate the pensions of public employees. That’s not only grossly unfair, but also ridiculously misleading. Even massive reductions in pay and retirement costs wouldn’t be enough to fund major expansions in education.

Putting both the fair tax and the millionaire’s tax on the November ballot would give us the best of both worlds – a fair tax structure to meet the needs of Illinois citizens and a guarantee the wealthiest among us would pay their fair share.