Crain’s columnist Greg Hinz supports Pritzker’s graduated income tax proposal

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When it comes to state finances, nothing is clear, simple or pure. Everyone has a motive and a constituency they play to. Everyone has an eye on election—or re-election—no matter what they say.

Remember when Gov. Jim Edgar, running for re-election, absolutely ripped up Democratic nominee Dawn Clark Netsch for proposing to swap higher state income taxes to fund schools for lower local property taxes, and then proposed just that—after the election, that is? Or when then-Illinois Senate GOP Leader Christine Radogno struck a grand bargain with Democrats to finally end a state budget war, only to have Gov. Bruce Rauner spike it because it wasn’t perfect?

These things never are pretty. Which leads to the subject of whether to enact Gov. J.B. Pritzker’s graduated income tax after a campaign that can only be called butt ugly.

I’m going to vote for the proposition as the best available way to try to ease some of Illinois’ genuine fiscal pain. But Pritzker sure hasn’t made it easy.

The core argument in favor of the amendment is, to borrow Pritzker’s language, "fairness." Almost every other state and unit of government that imposes an income tax does so at varying rates, hitting the well-off harder than those struggling to feed their family. The current Illinois Constitution allows only a flat tax, and the amendment would let lawmakers change that and impose graduated rates.

Unfortunately for Pritzker, that truth has been sort of lost because he’s played into the opposition’s hands. Not by secretly plotting to raise taxes on retirement income; the General Assembly already has the power to do that, and can do so by adding so many exemptions that the rate effectively would be gradual. Instead, I’m referring to Pritzker’s failure to deal with the two biggest problems in Illinois government: Mike Madigan and unaffordable worker pensions.

The governor has tiptoed for nigh unto two years around the powerful House speaker, even as federal prosecutors close in. I understand why, but that decision will exact a horrid price if Pritzker’s prized tax plan goes down because voters don’t trust crooked Springfield to spend the money correctly. On pensions, he’s done a little around the margins, but he won’t get behind a vote on a constitutional amendment to cut them, hasn’t bargained hard enough with unions to make up some money another way, and guarantees only that unfunded pensions will get a teeny slice of the proceeds from the graduated tax on wealthy people. Not much property tax relief in this deal, either.

Not good enough.

But neither are arguments from the foes, amplified in millions of dollars of TV ads paid for by Citadel’s Ken Griffin, among the state’s richest men and someone who surely has personal reasons to vote "no." Arguments such as: The General Assembly will start taxing middle-class people more if the amendment passes. No it won’t, because most lawmakers want to keep their job.

The strongest anti argument is that higher taxes will whack a state that already underperforms economically, encouraging more people to leave. But that generally hasn’t happened in the 32 other states that already have a graduated income tax. Beyond that, consider what will happen if the tax goes down. Pritzker, Madigan, et al., aren’t going to magically fall to their knees, crawling to Republicans for help in slashing spending and pensions. Instead, they signaled they’ll just raise the current flat rate some more. In my view, doing that would cause significantly more harm and cause significantly more people to leave the state than would taxing millionaires more.

This state doesn’t need another Rauner-style standoff. If anything hurt this state in recent years, it was Rauner’s government shutdown, which sent the message to business that this state’s problems never would be solved. It therefore shouldn’t surprise you that some of the leaders of the anti-graduated-tax movement were close Rauner associates.

I’m not happy. Neither, I suspect, are you. But I’m going to hold my nose and vote "yes" for the graduated income-tax amendment.

via Crain’s Chicago Business https://ift.tt/1mywUHL

October 20, 2020 at 07:05AM

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