The Fair Tax
A recent contribution to ViewPoints did readers a disservice by
describing the proposed Fair Tax as a “moolah grab”. This pejorative term
completely ignores the fact that: (1) the state’s current fiscal
situation is dire. (2) the state has experienced a deficit every year for the
past twenty years. (3) regardless of what the Illinois supreme court decides
the state will still owe its pension funds $100 billion. (4) since 1970
the 3% flat tax has failed to generate sufficient revenue to enable the state
to fully pay its vendors much less its pension obligations. (5) 90% of the
state’s revenue is spent in just four core areas: education(35%), health
care(29%), human services(20%) and public safety(6%). Any proposed cuts
in state expenditures must recognize that Illinois ranks near the bottom
nationally in its spending on core services.
Illinois desperately needs a graduated income tax. According to the Center for Tax and Budget Accountability(CTBA) a graduated income tax would cut over all state income tax for 94% of all taxpayers. In addition it would raise at least $2.4 billion annually in new revenues. It would accomplish this by shifting the tax burden to affluent tax payers, e.g. those with annual incomes in excess of $150,000. According to the CTBA these tax payers, would pay 4.3% of income instead of the current 2.1%. Joseph Stiegliz-Nobel Prize winning economist avers that modestly increasing taxes on the affluent does not materially reduce their spending because of their significant portion of all income growth. Since their spending is a smaller proportion of their income than it is for lower income taxpayers Stiegliz says that they have a low marginal propensity to consume. On the other hand spending by low and middle-income families is a much larger proportion of their income and so these folks are said to have a high marginal propensity to consume; they simply do not earn enough to save and invest.
Illinois current tax policy is neither fair to lower- and middle income taxpayers nor is it designed to sustain state services. Our current tax policy also hurts Illinois’ economy by reducing consumer spending by lower- and middle income families. In 2015, the temporary income tax increase will begin to phase out. This will add an additional $2 billion to an already $8 billion deficit. Illinois, however, will still need to fund vital public services as well as pay current and past bills. Now is the time to act.
Ramifications of Dropping the 2% "Temporary" Tax
Dropping the 2% “temporary” tax would pile $2B more dollars on our current $8B deficit in the state’s “balanced budget”. Illinois is now near the bottom nationally in funding core services, i.e. only Texas and Florida provide less support. Anyone who advocates dropping the 2% has the obligation to tell voters how they propose making up for the additional deficit. To say the State will simply cut back on expenditure is simplistic. In education we have cut foundation level to poor school district by 15%. The huge cuts the state has already made in human services to our most fragile citizens is unconscionable. Ninety percent of all state expenditures are in only four core areas, i.e. education(35%), health care(29%), human services(20%) , and public security(6%). So what do you want to cut next?
Illinois desperately needs a graduated income tax. According to the Center for Tax and Budget Accountability(CTBA) a graduated income tax would cut over all state income tax for 94% of all taxpayers. In addition it would raise at least $2.4 billion annually in new revenues. It would accomplish this by shifting the tax burden to affluent tax payers, e.g. those with annual incomes in excess of $150,000. According to the CTBA these tax payers, would pay 4.3% of income instead of the current 2.1%. Joseph Stiegliz-Nobel Prize winning economist avers that modestly increasing taxes on the affluent does not materially reduce their spending because of their significant portion of all income growth. Since their spending is a smaller proportion of their income than it is for lower income taxpayers Stiegliz says that they have a low marginal propensity to consume. On the other hand spending by low and middle-income families is a much larger proportion of their income and so these folks are said to have a high marginal propensity to consume; they simply do not earn enough to save and invest.
Illinois current tax policy is neither fair to lower- and middle income taxpayers nor is it designed to sustain state services. Our current tax policy also hurts Illinois’ economy by reducing consumer spending by lower- and middle income families. In 2015, the temporary income tax increase will begin to phase out. This will add an additional $2 billion to an already $8 billion deficit. Illinois, however, will still need to fund vital public services as well as pay current and past bills. Now is the time to act.
Ramifications of Dropping the 2% "Temporary" Tax
Dropping the 2% “temporary” tax would pile $2B more dollars on our current $8B deficit in the state’s “balanced budget”. Illinois is now near the bottom nationally in funding core services, i.e. only Texas and Florida provide less support. Anyone who advocates dropping the 2% has the obligation to tell voters how they propose making up for the additional deficit. To say the State will simply cut back on expenditure is simplistic. In education we have cut foundation level to poor school district by 15%. The huge cuts the state has already made in human services to our most fragile citizens is unconscionable. Ninety percent of all state expenditures are in only four core areas, i.e. education(35%), health care(29%), human services(20%) , and public security(6%). So what do you want to cut next?