Temptation for pols to raise taxes only on ‘the rich’ will be hard to resist
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J.B. Pritzker was recently endorsed by Crain’s Chicago Business. Yes, you read that right. The state’s premiere business magazine endorsed a candidate whose biggest promise is to raise taxes on the publication’s well-off subscriber base.
Gov. Bruce Rauner has called Pritzker’s graduated income tax proposal “a green light to raise taxes on everyone.”
Pritzker has infamously dodged hundreds if not thousands of questions about what the graduated rates will be and where the cutoff will be between a middle-class tax cut and tax hike on the wealthy.
“The reason Mr. Pritzker doesn’t want to answer the question.” Rauner said during the last debate, “is because he knows it’s going to crush the middle class, and he doesn’t want to admit it before the election.”
Maybe. But the main reason that people like Rauner hate Pritzker’s idea is not that it’ll necessarily make middle class families pay more taxes.
Increasing taxes on everyone is a very difficult thing to do here. A two-percentage point tax hike only passed in 2011 because the state was in extremely dire fiscal straits. Before that, the tax rate wasn’t increased by more than a half a point since the income tax was created in 1969. The rate was increased last year because a bipartisan supermajority in both chambers reacted to another extremely dire fiscal condition after part of the 2011 increase expired.
But it would be a whole different ball game with graduated rates. And people like Rauner know this all too well. The temptation for politicians to raise taxes only on “the rich” will be really difficult to resist during tough fiscal times.
Right now, with a flat tax, that can’t be done. A tax hike for one is a tax hike for all.
But if our state’s constitution is amended to allow for graduated rates, a Democratic legislature could decide down the road to slap an extra surcharge on all annual income over, say, a million dollars. And then do it again. Who would be opposed to that? Well, millionaires, of course, but there’s not enough of them to stop the Democrats.
I’m not saying that Rauner is trying to block a graduated tax for his own personal sake. He may be, but I’m not saying it. I’m saying that Rauner truly believes that wealthy people create jobs (even though his former firm created lots of wealth and very few actual jobs), and harming wealthy people harms job creation and that harms the poor and the middle class and Democrats don’t care about wealthy people, so the graduated tax must be stopped at all costs to protect the wealthy and the poor and the middle class.
At least, that’s the theory. The reality is more jobs were created in the four years after Illinois’ January 2011 tax hike than the four years after it was automatically lowered and then raised again.
Gov. Rauner warned that the 2017 tax increase passed over his veto would be a “disaster” for the state and imperil our economic and fiscal future, but he’s now crowing about recent job growth and a balanced budget.
Rauner’s loud warnings about the damage the tax hike would do were wrong, so, that undermines his similar warnings about a graduated tax.
And, if the polling is correct, the idea isn’t hurting Pritzker at all. Three polls in a row have shown Pritzker with double-digit leads. The most recent poll by the Paul Simon Public Policy Institute had Pritzker ahead of Rauner by 22 points.
One of Rauner’s many weaknesses exposed by the poll was that only 67 percent of Republicans supported him. I crunched the numbers and found that even if he captured 90 percent of the Republican vote, he’d move from his current 27 percent all the way up to … 31.5 percent. And if he then captured every single one of the undecided independents (an impossibility), he’d go from 31.5 percent to 37 percent.
The governor is spectacularly unpopular, but the current political environment is just horrible for his party. The partisan split in the Simon poll was a whopping 49 percent Democrat to 27 percent Republican.
The last off-year Democratic wave was 2006, and exit polls showed the partisan makeup of the Illinois electorate was 46 percent Democrat to 31 percent Republican. That’s close to the Simon Poll results.
The current environment simply makes it easier for a Democrat to talk about a tax hike and still win, particularly if his opponent is as unpopular as Rauner.
Rich Miller also publishes Capitol Fax, a daily political newsletter, and CapitolFax.com.