Illinois Graduated Income Tax – The Fair Tax – What It Does and Does Not Do
If you’re going to be informed, then let me suggest that you be informed. Purely and simply, a change in Illinois tax law to a graduated income tax from a flat income tax is a simple question of fairness: it places the burden of taxation on the wealthy and takes it off of lower income people – and does not affect middle income people much at all.
Here are the things it does not change, threaten to do or intend.
Taxation of Pensions. This can be done now. It is not a special threat of a graduated tax.
Give the legislature license to Increase Tax Rates. The legislature can do this now. It is not a special threat of a graduated tax. Here’s what the League of Women Voters says: “Fair Tax states are twice as likely to cut taxes on the middle class. Ninety-three percent of the states which have progressive income taxes have seen no increase in income taxes on the middle class in the last 20 years. It is more likely that the middle class will see an increase in their income taxes if this ballot measure does NOT pass than if it does.”
Kill “80% of Small Businesses”. Actually, 10% of small businesses in Illinois will realize higher taxes. Thus (try to stay with me here) 90% will not. So the “80% killer” scare is a plain lie.
Fix the Pension Crisis. A totally separate issue, but if the anticipated higher amounts of tax are collected from the wealthy, revenue will increase substantially and some of that revenue could be used to fund pensions or relieve debt. This is not possible now.
Fail to help with Real Estate taxes. If the anticipated higher amounts of tax are collected from the wealthy, revenue will increase substantially and some of that revenue could be used to fund education at the rate the state should fund education, reducing the Real Estate tax burden for education funding. This is not possible now.
Cost a “typical Illinois family $3,500”. A pure fantasy disingenuously promulgated by the Illinois Policy Institute. If a “typical Illinois family” is a middle-class family, 97% of taxpayers in the state will see no increases at all and many middle- and lower-income families will realize a tax cut. The IPI is laughably termed a “think tank.” It is a right-wing lie tank.
Cause people to leave the state. No state that has adopted a graduate income tax has seen this happen. And if, for example, someone leaves to go to Indiana, where the income tax is a flat tax, they’ll find that the net tax and service fee burden in the state is substantially higher than that in Illinois – also true in other neighboring states.
The bottom line. If you’re against taxation in any form, fine. You’re against it. If your thought is that the flat tax is a bulwark against the legislature’s ability to raise tax rates, you’re correct but you’re perverse if you also demand that, for example, the legislature relieve the real estate tax burden or solve the pension underfunding and debt issues. All of those require more revenue – NOT cutting spending, which accomplishes nothing at all. With a flat tax, to realize increased revenue, the legislature would have to raise rates on EVERYONE. This would be patently unfair.
If you have a lot of skin in the game – in other words, you’re wealthy – please do us a favor and stop representing yourself as a champion of the normal taxpayer if what you’re actually doing is avoiding taxes. You’re not a champion. You’re a manipulator seeking to retain your wealth, even if you shaft the ordinary taxpayer in the process.
The need here is to remove the burden of taxation from those in the middle or at the bottom of the economic system while also making it possible to increase tax revenue – which is essential before we can begin to honestly solve major problems such as pension liabilities and high real estate taxes.
So, will tax rates increase with the Fair Tax? Undoubtedly. But not for you – unless you make a whole lot of money on an annual basis. If you do make a lot of money? You can afford a tax attorney or a whole fleet of them. The rest of us cannot.
Edmund J. McDevitt
©October, 2020