How Pritzker may win by losing the ‘fair tax’ fight

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The contest ahead of a Nov. 3 vote on Pritzker’s proposed amendment to the Illinois Constitution remains close. A source familiar with daily polling data from the pro-amendment side told me the projected outcome is within the margin of error of the polls, too close to call.

Other facts support this. Lt. Gov. Juliana Stratton recently warned about a possible 20 percent tax hike on everyone if the amendment fails. The threat would not be needed if the vote were secure.

Griffin late last month poured another $26.8 million into the campaign to stop the amendment. He wouldn’t have doubled his initial outlay if the outcome weren’t still in play.

It’s astounding the contest is close. The "fair tax" is a soak-the-rich appeal to raise taxes on the top 3 percent of earners. The remaining 97 percent are told their taxes will drop or stay the same. The 6 million taxpayers expecting lower or level tax bills should overwhelm the 190,000 in the top 3 percent who would face a tax hike.

Of course, politics is more than math. It requires understanding the hopes and fears of people, their sense of whom to trust and what to believe. Those concerns help explain why Pritzker’s proposal is not faring better.

Opponents grant Pritzker’s estimate that the graduated tax will bring in an estimated $3.4 billion a year in increased revenue. Large as it may sound, the extra revenue would barely make a dent in the state’s $8 billion in unpaid bills or this year’s nearly $7 billion budget deficit, much less the $137 billion in pension underfunding.

Voters also have fair concerns about the state’s fiscal discipline day to day. Unlike other big-state governors, Pritzker so far has not imposed furloughs, layoffs or other cuts in response to the pandemic

The governor’s pitch for a fair tax relies on an assumption that Illinois voters trust their government. They need to believe tax hikes originally affecting only the top 3 percent won’t quickly make their way to middle-income brackets.

But this is the government that promised generous retirement income and a 3 percent annual cost-of-living raise, then systematically underfunded pensions. It sold bonds to help pay down pension obligations. Instead, the funds chiefly went into operations.

Systematic corruption makes matters worse. Voters pay directly, in the form of Commonwealth Edison subsidies and rate hikes lubricated by efforts to bribe House Speaker Michael Madigan, for example. When all four legislative leaders use a "millionaire’s loophole" in the state’s campaign finance law to funnel millions into campaign war chests, perpetuating their hold on power, that erodes trust, too.

Opponents of the amendment take advantage of voter distrust, stirring the pot with contentious issues. They recently claimed passage of the amendment would clear the way for a law enabling Illinois to tax retirement income.

It’s odd to see conservatives, many of whom see a case for taxing retirement income, raise the possibility as an argument against the amendment. In this fight, apparently, no holds are barred.

Despite all the complicating factors, the graduated tax amendment may yet pass. If that happens, chances for broader fiscal reforms likely will fall—until the next crisis hits.

If the amendment fails, Pritzker’s short-term loss might possibly be turned to the state’s advantage. He need not give up on the graduated tax entirely. Instead, a loss Nov. 3 might give Pritzker a reason to do what he should have done in the first place: pair pension reform with his graduated income tax, a combination that could win broader support.

If Pritzker does add pension reform to the mix, the state’s two battling billionaires and their millions of followers might find common ground—to the benefit of all the people in Illinois.

Crain’s contributor David Greising is president of the investigative watchdog Better Government Association.

via Crain’s Chicago Business

October 9, 2020 at 05:04PM

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