EDITORIAL: Beware of the disinformation campaign against a fairer tax for Illinois
The nature of the levy — progressive income tax versus flat income tax — makes it no harder or easier, politically speaking, to raise taxes on the middle class. But that’s not what progressive-tax opponents want you to hear.
It’s a concept rooted in fairness.
A wealthy person might put his last dollar of income toward buying a second or even third home. A single mother who works a minimum-wage job might put her last dollar toward buying diapers for her baby, if she hasn’t already spent it on the rent.
A progressive income tax is consummately fair, to our thinking, and we’re not alone. A majority of Americans favor progressive income taxes over flat income taxes. They even think the top rate for federal income taxes should be raised.
Not for nothing have 34 of the 50 states already adopted a progressive income tax.
Yet since May, when the state Legislature and Gov. J.B. Pritzker put a proposal for a progressive income tax on the ballot, business groups and anti-tax zealots have waged a disinformation campaign to turn you, the voter, against it.
They make alarmist claims that don’t hold up. They offer no better solutions for putting our state’s finances in order. They have no realistic alternative for how the state can meet pension obligations that the courts say cannot be ducked. They don’t explain how the state would otherwise pay down a $6.97 billion backlog of unpaid bills.
They would have you believe Illinois can simply cut its way to better financial health. But what billions of dollars in “fat” would they cut? They never spell it out. Should Illinois close its public universities? Should it slash state aid to public schools, abandoning school districts for poor kids that have little property wealth to tax?
They would have you believe there is a miracle cure — cut pension benefits for current public employees. But the courts have ruled this would be unconstitutional; and even rewriting the state Constitution to make it constitutional would stand a good chance of being shot down by the federal courts. After a decade or more of litigation.
We, too, favor reducing pension benefits for current employees. Specifically, we believe the 3% compounded increase in benefits each year is overly generous given the state’s horrendous financial situation, and given the slower growth of pensions in the private sector.
But, like it or not, the honest truth is that reducing pension benefits probably cannot be done unilaterally. Even the most creative solutions will have to be negotiated with employee unions.
Let’s walk through a few of the other talking points of those who oppose a progressive income tax:
• It would be a “new taxing power,” they say, that puts a “bull’s-eye” on the backs of middle-class taxpayers. That argument, which we’ve heard before, was made this month by John Canning, chairman of the Chicago private-equity firm Madison Dearborn Partners, in an opinion piece in Crain’s Chicago Business.
The claim is false. The specific progressive income tax Pritzker has proposed, and which the Legislature voted to approve, would generate an extra $3.4 billion for the state by raising taxes only on people who earn $250,000 or more a year. It would maintain the current tax rate of 4.95% on incomes between $100,000 and $250,000. And it would reduce the rate on incomes of $100,000 or less.
This is not a “new taxing power.” It is a restructuring of the existing taxing power. It would require that the rich pay more so that the middle class and working poor can finally catch a break.
If the Legislature and Pritzker down the road wanted to increase that progressive tax, possibly sticking it to the middle class, they could. But they can do that right now with the flat tax — and that’s a tax that always sticks it to the middle class.
The nature of the levy — progressive versus flat — makes it no harder or easier, politically speaking, to raise taxes on the middle class.
• The extra $3.4 billion to be raised by the progressive tax, the critics say, would be a pittance — a payday loan. It would, as Canning wrote, “fund just four months of a single year’s pension payment.”
This argument is disingenuous.
Nobody is seriously arguing that the extra $3.4 billion in revenue would solve all the state’s financial problems, certainly not in short order. The point is to move in the right direction after decades of fiscal mismanagement . . .
Would you turn down a $5,000 pay raise because it would cover only four months of your mortgage each year? Obviously not. You’d be happy to have the raise, knowing it would help you pay off that mortgage faster. You also would allocate that extra money carefully within your larger household budget — some for the mortgage, some for the car loan, some for your kid’s tuition.
In the same way, nobody is seriously arguing that the extra $3.4 billion in revenue would solve all the state’s financial problems, certainly not in short order. The point is to move in the right direction after decades of fiscal mismanagement, including the four years of disaster under Gov. Bruce Rauner.
• Critics of a progressive income tax — and this, we want to note, does not include Canning — are sometimes happy to allow people to be confused about how a progressive tax works. It’s easy to leave the impression that folks are taxed at a higher cumulative rate than they actually are.
Under the Pritzker plan, for example, we are told that people who earn between $100,000 and $250,000 will be taxed at a rate of 4.95%. We just wrote that, in fact, a few paragraphs above. But that’s a kind of short-hand explanation. To be more precise, those folks will pay a slightly lower total effective tax rate. This is because they will be taxed at only $4.75% on their first $10,000, and at 4.9% on their income from $10,000 to $100,000. They will be taxed at 4.95% only on income between $100,000 to $250,000.
As a result — and we have yet to see anybody refute this — the Pritzker administration estimates that 97% of Illinois residents will see at least a modest decline in their income taxes.
We’re all in favor of further cuts to state spending, so long as the essentials — beginning with universities, schools and social services for the elderly and disabled — are properly funded.
We’re also all in on pension reform, understanding that it will have to be negotiated.
And we’re completely on board with one other major reform — an end to the partisan gerrymandering of legislative districts — that is championed by critics of a progressive income tax. Nobody but self-serving politicians like gerrymandering.
But when it comes to a progressive income tax versus the flat tax, there is no contest.
In a nation in which the top 1% of Americans make 26 times more money than the other 99%, a progressive income tax demands that wealthier people pay a fairer share.
We can’t argue with that.
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