Jim Dey: Pritzker faces tough tax, spending issues

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Photo by: Stephen Haas/The News-Gazette

Billionair Demorcratic gubernatorial candidate J.B. Pritzker, right, speaks during an event where he received the endorsement of state Treasurer Mike Frerichs of Champaign, left, at the Illini Union in Urbana.

With the March 20 primary election just four months away, the multi-candidate race for the Democratic gubernatorial nomination is up for grabs.

But if conventional wisdom is correct — it’s often wrong — Chicago businessman and Democratic candidate J.B. Pritzker holds the whip hand.

He has the backing of party heavyweights. The campaign of his chief rival — former University of Illinois Board Chairman Chris Kennedy — has yet to catch fire. None of the other five candidates, including Evanston state Sen. Daniel Biss, has shown the pol-itical or financial wherewithal to compete with the big boys.

Anything, of course, can happen. But, at least for now, Pritzker, the billionaire heir to a family fortune, looks likely to emerge as the Democratic nominee and then defeat incumbent Gov. Bruce Rauner, a wounded Republican seeking re-election in an overwhelmingly Democratic state.

All Pritzker would have to do to win is carry one of the state’s 102 counties — Cook — by a strong enough margin, just as former Gov. Pat Quinn did in 2010.

That’s why a recent interview Pritzker gave to Crain’s Chicago Business is revealing, especially considering how quickly his campaign moved to clarify the candidate’s words.

Quoting Pritzker, reporter Greg Heinz wrote that “Illinois may need another tax hike to balance the books and pay for needed public investments, even if the progressive income tax eventually comes about.”

In other words, according to Crain’s, without specifically saying so, Pritzker raised the possibility of increasing the current 4.95 percent rate, which was increased from 3.75 percent earlier this year, as a prelude to replacing the state’s flat income tax with a progressive income tax.

“Pritzker did not say that, but only left himself open to some kind of further tax hike,” Heinz wrote.

In politics, leaving the door open, as Pritzker clearly did, is enough to initiate a debate. No wonder the Pritzker campaign moved quickly to tamp down the speculation.

“J.B. Pritzker does not believe we should raise taxes on middle-class families, period,” according to the campaign statement.

A supporter of marijuana legalization, Pritzker estimated the state could raise $300 million to $700 million in new revenue by taxing marijuana sales.

But Pritzker acknowledged in the Crain’s article that a tax on marijuana sales, which could not reasonably be considered to be the same as levying higher taxes on the general population, would not be sufficient to redress Illinois’ horrendous, multi-billion-dollar financial woes.

So that would leave Illinois short of the revenues needed to support Pritzker’s spending plans, raising the question of an income tax hike prior to passing a progressive income tax amendment.

Why do both instead of either one or the other?

A referendum vote on a progressive tax amendment would almost certainly have to wait until November 2020. Further, it would be a tough sell to suspicious voters.

So if a Pritzker administration wants more revenue to spend in 2019 and thereafter, it’s almost a political necessity to use a one-two punch — flat tax hike immediately and progressive income tax constitutional amendment later.

That is, of course, unless Democratic House Speaker Michael Madigan tries this spring to force the amendment issue on to the 2018 ballot, something that would not be politically wise.

Gov. Rauner certainly isn’t going to suppose an income tax increase. So the Democratic legislature won’t raise the state income tax until a Democratic governor assumes office in January 2019.

The question then becomes — what will happen between 2019 and 2020 under a theoretical Pritzker administration?

Just as Gov. Rauner has said repeatedly, Pritzker told Crain’s he wants to preside over an expanding economy that generates natural revenue growth.

Rauner contends the best method of doing so is to make Illinois’ business climate more hospitable to job creators so that more people will be working and paying taxes.

Pritzker told Crain’s he would boost the Illinois economy by spending more on education and infrastructure, “something he said would attract young talent and jobs, much as they have in high-tax states such as California, Minnesota and New York,” the Crain’s article stated.

Education and infrastructure are crucial to economic growth. But spending more money on education one year doesn’t have an impact on the economy the next year — it’s a slow-motion process built on years of providing first-rate K-12 and higher education and job-training opportunities.

Infrastructure spending, too, is a major economic contributor. Private sector construction spending provides thousands of good jobs and generates many millions of dollars in tax revenues. But spending hundreds of millions of dollars on public-sector infrastructure, like what’s been talked about in Springfield recently, costs the government more to finance than it generates in tax revenue, at least in the short term.

While acknowledging additional revenue from marijuana taxes would not be sufficient to meet his spending plans, Pritzer spoke vaguely about budget cuts. But he said he couldn’t be specific because “I haven’t proposed a budget” and would not be able to do so until the first quarter of 2019, the Crain’s article stated.

So what, then, is Pritzker’s plan? He said “the first focus is on accelerating growth and not raising taxes.” But if Pritzker doesn’t get all the revenue he wants to spend, how will he finance his favored programs other than to continue the long-standing practice of spending money the state doesn’t have?

It’s on that thorny issue where Pritzker appeared to embrace both sides of the tax hike issue in the Crain’s interview. That prompted the Rauner charge that Pritzker “supports another tax increase on every Illinoisan” and the Pritzker denial.

Even as questions surround the primary race, a template for the November election is being set.

Jim Dey, a member of The News-Gazette staff, can be reached by email at jdey@news-gazette.com or by phone at 217-351-5369.

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