A progressive income tax is Illinois’ best shot at solving budget crisis

After many years of struggle, it looks like momentum for progressive tax reform in Illinois is picking up.

Democratic gubernatorial candidate J.B. Pritzker, who’s mounting a strong campaign, has backed a constitutional amendment to allow a progressive income tax, under which rates would be higher for those with higher incomes. Democratic legislative leaders, long hesitant on this issue, are recognizing the necessity of the change.

The Center for Tax and Budget Accountability recently issued a report detailing how a progressive income tax could be structured to reduce taxes for 98 percent of state residents – everyone earning less than $300,000 a year – and still raise an additional $2 billion a year.

The extra money comes from raising the marginal rate for higher earners, up to 9.85 percent for people making over $1 million a year. That’s the top income tax rate in the Midwest, found in Minnesota (though there it applies to individuals making over $160,000) ­– which is the state that has led the region in job growth since raising taxes on the rich five years ago (and raising the minimum wage).

CTBA argues that Illinois’s fiscal problems stem from its flat rate income tax with a single rate for all income levels.  That cuts the state off from the vast wealth that’s accumulated at the top of the income ladder. Combined with deductions and other state and local taxes, it gives Illinois one of the most regressive tax structures in the nation. “In Illinois, the top 1 percent of income earners pay just 4.6 percent of their income in state and local taxes, while … the bottom 20 percent of earners have almost three times the tax burden of the wealthiest, [paying] 13.2 percent,” according to the group’s new report.

It’s not that taxes are too high, it’s that the wealthy aren’t being taxed enough and everyone else has to make up for it. A progressive income tax would be fairer and would do a better job of raising revenue. After years of budget crisis, folks are catching on.

Of course, Gov. Bruce Rauner and Republicans see it differently. Rauner is gearing up for a re-election campaign that will hinge on his promise to cut taxes. It sounds quite good in a 30-second TV commercial. That’s because 30 seconds isn’t enough time to ask how it would actually work.

Rauner has been promising – and failing – to cut taxes by cutting spending since his first days in office. His first act was to issue an executive order calling for a review of the state’s budget to identify “nonessential spending.”

He immediately faced a state budget with a $1.3 billion gap due to the expiration of a temporary tax hike he’d campaigned against extending. But instead of cutting $1.3 billion in nonessential spending, he negotiated a deal filling the gap with a sweep of special funds. He complained when $300 million in cuts were still required.

Later that year his administration finally reported back on the executive order and proposed cutting just $26 million in “nonessential spending.”  But that turned out to cover such programs as assistance for autistic children and burial funds for the indigent, among other things, and lots of folks objected to calling them “nonessential.” The cuts were rescinded.

Last year, the Illinois Policy Institute, at the time Rauner’s chief external ally, proposed a budget blueprint for balancing the state’s budget without new revenue (not even cutting taxes). This would have required $1.2 billion cuts in K-12 funding, nearly $1 billion in cuts to higher education, eliminating $1.75 in state assistance to local governments, and eliminating 600,000 people from Medicaid rolls. CTBA said the cuts “would have a devastating effect on the state’s economy,” costing tens of thousands of jobs.

Now running for re-election, Rauner is presenting two very different faces. In his campaign commercials he touts his veto of last year’s tax hike; in his budget he relies on that revenue.  His commercials promise a property tax freeze; his budget shifts pension costs to local school districts, guaranteeing property tax increases. His campaign brags about increasing school funding; his budget reduces state support for schools by as much as a half-billion dollars.

In his budget, Rauner proposed a $1 billion tax cut based on a pension reform scheme that is quite possibly unconstitutional without giving any details of how the new system would work.  The tax cut “plan” promptly showed up in a commercial ­– which the Better Government Association rated “mostly false.”

If we can cut through the haze of big money media campaigns and have an honest and fact-based discussion of this issue – with a measure of compassion for the folks who rely on and provide crucial public services – we may be able to move this state forward.