True GRIT
A large chunk (though certainly not all) of Illinois' financial problems are due to its tax structure. The state constitution mandates that the state income tax be flat, i.e. that those individuals in higher brackets may not be charged higher rates than those at the bottom. This makes it impossible to raise rates on those who could afford to pay more without also raising them on those who can't.
An amendment to change this has been filed as HJRCA0002 by Reps. Naomi Jakobsson and Linda Chapa LaVia. This would amend the state constitution to allow different tax rates for different income ranges, as the federal income tax and those of most other states' do. The Illinois League of Women Voters refers to this as a GRIT Fair Tax, GRIT meaning Graduated Rate Income Tax.
Passing this would be a multi-step process:
The push for GRIT/Fair Tax in Illinois is supported by organizations including the IL League of Women Voters, Jobs With Justice, and the Center For Tax and Budget Accountability. We need to persuade our representatives to let us vote on it. But even while that's going on, we need to talk to people in our communities about it and counter what the propaganda mills are saying. A lot of misinformation is already being spread and it will increase greatly by the time it actually comes up for a vote.
Below the fold, a number of arguments you're likely to hear against the graduated tax, and why they're disingenuous or just wrong.
Myths Concerning the Graduated Rate Tax
Myth: We don't need new taxes; we can solve the budget problems by cutting spending.
It's an article of faith among right-wingers that government financial problems are always due to overspending, never due to inadequate revenue. All facts indicate otherwise.
After adjusting for inflation, our state government spends substantially less than it did twenty years ago. We are at or near the bottom of state rankings for categories such as state employees per capita or percentage of education funding provided by the state. And the effects of underspending are clear: our schools are understaffed, roads and other infrastructure are barely being kept up, and more and more people can't get critically needed health assistance, especially for mental health disorders. Do we really want mentally ill individuals running around unsupervised, especially if they have unlimited access to weaponry?
Is there waste in the state budget? No doubt there is, and it should be eliminated. But there isn't enough of it to make any significant impact on the budget gap. Spending cuts deny services to those who need them most and will cost more in the long run.
What's more, as CTBA's anaylsis has shown, our state's expenses are increasing faster than its tax revenues. So even if through some miracle we balanced the budget this year through cuts, it wouldn't stay balanced for the next and succeeding years. Our problems are structural, and only a structural fix will address them.
Myth: The state's financial problems are the fault of greedy teachers and other state employees.
If teachers were overpaid, a lot more people would want to be one. In fact, teaching jobs like others in public service offer low pay compared to others requiring comparable training. What's more, teachers have to face situations that are difficult and sometimes dangerous. And the service they provide is unquestionably valuable. In a country where bankers can wreck the economy and reap multi-million-dollar bonuses, and where others can get multi-million-dollar salaries for throwing balls around a field, it's unconscionable that we should begrudge teachers a reasonably comfortable retirement, especially for those to whom this was promised when they first signed up for the job.
The so-called pension crisis wasn't caused by employees. The state government under both parties caused the crisis by borrowing against the pension fund in order to spend money on services without taxing the public for what the services cost. It would be grossly unfair and unworkable to try to balance the budget on the backs of retirees.
Myth: This is just a way of allowing the legislature a blank check to increase our taxes.
The legislature already has the power to raise taxes. The only thing it can't do is limit tax increases to upper-income payers.
Myth: This will raise your taxes.
Under the current flat tax, eventually the state will have to pay its obligations, and the only way to do this would be to raise taxes of some sort on you and everyone else. With a graduated tax, increases could be limited to top income brackets. How this would work would depend on the details of the tax plan passed, but under one such scenario analyzed by the CTBA, 96% of all Illinois taxpayers would pay less tax. So most likely, unless your salary is in at least six figures, the graduated tax is the only way your taxes won't go up.
Myth: The only really fair tax is where everyone pays the same rate.
A flat tax is anything but fair. For the people at the bottom, a five-percent tax (for example) might mean having to give up a vacation, or a child's education, or even health care. For those at the top, it would mean no sacrifice even remotely comparable.
But in reality, our tax structure is anything but flat. When one factors in sales taxes, property taxes, and all other taxes and fees imposed by state and local governments, bottom-level income earners actually pay a much higher percentage than top-level ones under Illinois' current structure.
Myth: Higher taxes on upper incomes will stifle entrepreneurship and investment.
Did you hear the story about the Fortune 500 CEO who gave up his job to become a clerk at Wal-Mart so that he could pay a lower tax rate? Neither did I.
There's no known case of someone giving up the chance to make lots of money just because he or she would be expected to give some back to the public in the form of taxes. Even in the 1950s when the USA had top rates exceeding ninety percent, it didn't slow down the pursuit of profit. What's far more likely to stifle entrepreneurship is the lack of a broad enough customer base. No matter how regressive taxes are, few people are going to make a product that the general public can't afford to buy.
In the USA we currently have the richest, and least taxed, rich people that we've ever had, yet there's relatively poor investment because there isn't enough demand to make it worthwhile.
Myth: Higher taxes on upper incomes will cause the persons in question to leave the state.
And go where? The other states surrounding Illinois already have graduated taxes.
An amendment to change this has been filed as HJRCA0002 by Reps. Naomi Jakobsson and Linda Chapa LaVia. This would amend the state constitution to allow different tax rates for different income ranges, as the federal income tax and those of most other states' do. The Illinois League of Women Voters refers to this as a GRIT Fair Tax, GRIT meaning Graduated Rate Income Tax.
Passing this would be a multi-step process:
- Three-fifths majorities in each house of the legislature (36 Senators and 71 House members, assuming no abstentions) must vote to put it on the ballot.
- Once on the ballot, it must be approved by a three-fifths majority of everyone voting on the amendment, or by a simple majority of everyone who voted in the election even counting those who skipped this particular question.
- With the amendment passed into law, the legislature would need to create a graduated tax rate plan and pass it through the normal legislative process.
The push for GRIT/Fair Tax in Illinois is supported by organizations including the IL League of Women Voters, Jobs With Justice, and the Center For Tax and Budget Accountability. We need to persuade our representatives to let us vote on it. But even while that's going on, we need to talk to people in our communities about it and counter what the propaganda mills are saying. A lot of misinformation is already being spread and it will increase greatly by the time it actually comes up for a vote.
Below the fold, a number of arguments you're likely to hear against the graduated tax, and why they're disingenuous or just wrong.
Myths Concerning the Graduated Rate Tax
Myth: We don't need new taxes; we can solve the budget problems by cutting spending.
It's an article of faith among right-wingers that government financial problems are always due to overspending, never due to inadequate revenue. All facts indicate otherwise.
After adjusting for inflation, our state government spends substantially less than it did twenty years ago. We are at or near the bottom of state rankings for categories such as state employees per capita or percentage of education funding provided by the state. And the effects of underspending are clear: our schools are understaffed, roads and other infrastructure are barely being kept up, and more and more people can't get critically needed health assistance, especially for mental health disorders. Do we really want mentally ill individuals running around unsupervised, especially if they have unlimited access to weaponry?
Is there waste in the state budget? No doubt there is, and it should be eliminated. But there isn't enough of it to make any significant impact on the budget gap. Spending cuts deny services to those who need them most and will cost more in the long run.
What's more, as CTBA's anaylsis has shown, our state's expenses are increasing faster than its tax revenues. So even if through some miracle we balanced the budget this year through cuts, it wouldn't stay balanced for the next and succeeding years. Our problems are structural, and only a structural fix will address them.
Myth: The state's financial problems are the fault of greedy teachers and other state employees.
If teachers were overpaid, a lot more people would want to be one. In fact, teaching jobs like others in public service offer low pay compared to others requiring comparable training. What's more, teachers have to face situations that are difficult and sometimes dangerous. And the service they provide is unquestionably valuable. In a country where bankers can wreck the economy and reap multi-million-dollar bonuses, and where others can get multi-million-dollar salaries for throwing balls around a field, it's unconscionable that we should begrudge teachers a reasonably comfortable retirement, especially for those to whom this was promised when they first signed up for the job.
The so-called pension crisis wasn't caused by employees. The state government under both parties caused the crisis by borrowing against the pension fund in order to spend money on services without taxing the public for what the services cost. It would be grossly unfair and unworkable to try to balance the budget on the backs of retirees.
Myth: This is just a way of allowing the legislature a blank check to increase our taxes.
The legislature already has the power to raise taxes. The only thing it can't do is limit tax increases to upper-income payers.
Myth: This will raise your taxes.
Under the current flat tax, eventually the state will have to pay its obligations, and the only way to do this would be to raise taxes of some sort on you and everyone else. With a graduated tax, increases could be limited to top income brackets. How this would work would depend on the details of the tax plan passed, but under one such scenario analyzed by the CTBA, 96% of all Illinois taxpayers would pay less tax. So most likely, unless your salary is in at least six figures, the graduated tax is the only way your taxes won't go up.
Myth: The only really fair tax is where everyone pays the same rate.
A flat tax is anything but fair. For the people at the bottom, a five-percent tax (for example) might mean having to give up a vacation, or a child's education, or even health care. For those at the top, it would mean no sacrifice even remotely comparable.
But in reality, our tax structure is anything but flat. When one factors in sales taxes, property taxes, and all other taxes and fees imposed by state and local governments, bottom-level income earners actually pay a much higher percentage than top-level ones under Illinois' current structure.
Myth: Higher taxes on upper incomes will stifle entrepreneurship and investment.
Did you hear the story about the Fortune 500 CEO who gave up his job to become a clerk at Wal-Mart so that he could pay a lower tax rate? Neither did I.
There's no known case of someone giving up the chance to make lots of money just because he or she would be expected to give some back to the public in the form of taxes. Even in the 1950s when the USA had top rates exceeding ninety percent, it didn't slow down the pursuit of profit. What's far more likely to stifle entrepreneurship is the lack of a broad enough customer base. No matter how regressive taxes are, few people are going to make a product that the general public can't afford to buy.
In the USA we currently have the richest, and least taxed, rich people that we've ever had, yet there's relatively poor investment because there isn't enough demand to make it worthwhile.
Myth: Higher taxes on upper incomes will cause the persons in question to leave the state.
And go where? The other states surrounding Illinois already have graduated taxes.
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