How Illinois could be affected by federal tax cuts for the rich

Bill Knight column for Thurs., Fri., or Sat., Sept. 6, 7 or 8


Illinois’ schools, highways, needy kids, seniors who need help with meals, and clean-water programs all could suffer financially if the GOP-controlled House gets the Senate to extend the Bush-era tax cuts, a new report says, and some progressives worry that Democrats are going to give in.

The U.S. House on August 1 rejected President Obama’s proposal to extend tax rates for middle-class Americans only, instead voting to continue tax cuts benefiting the rich. Four of five area Congressmen, all Republicans, supported the measure to let the top 2 percent of the country’s earners continue to pay 35 percent instead of 39.6 percent (still about half of what it was in the 1950s).

The vote was 256-171, with a few Democrats also supporting the “enrich-the-rich” bill.

Of area Congressmen, only Tim Johnson (R-Urbana) opposed it. Randy Hultgren (R-Geneva), Adam Kinzinger (R-Channahon), Bobby Schilling (R-Moline) and Aaron Schock (R-Peoria) voted for it. Schock also was a co-sponsor.

“Congressman Johnson doesn’t share the standard talking points of House Republicans on taxes,” said Phil Bloomer, press aide for Johnson, who is not running for re-election.

“He voted against the Democrats’ plan also,” Bloomer continued, “thinking that the two are at loggerheads and it’s an unnecessary stalemate. He thinks we ought to be looking to various ways to increase revenues.”

That stalemate is sure to continue this week, when Congress is scheduled to return from its vacation. The Senate previously defeated the GOP’s extension of tax cuts for the top incomes, 45-54, and backed the President’s measure 51-48.

The House in turn defeated the Democratic alternative, which would maintain lower rates for annual income up to $250,000 for families and $200,000 for individuals, while slightly raising the rate for take-home income above the first $250,000.

The AFL-CIO is “strongly against” extending the Bush-era tax cuts for the wealthiest Americans, says its Legislative Director, Bill Samuel, who adds that organized labor fears Democrats may cave in to GOP demands to help the rich again.

The pressure to do something when government faces tax cuts’ expiration, extended jobless benefits ending, and billions in mandated spending cuts – grew last month, when the director of the Congressional Budget Office testified that if Congress does nothing, the lackluster economic recovery could slip into another recession.

In Illinois, extending the tax cuts for the wealthiest households will mean the richest 3.4 percent of Illinois taxpayers would get 47 percent of the total tax breaks in the state, according to a new report from three non-partisan, non-profit groups: Americans for Tax Fairness, the National Women’s Law Center, and Citizens for Tax Justice. The rich’s average tax cut would be about $36,000.

Based on data from the Congressional Budget Office and the Institute on Taxation and Economic Policy, the report shows that if Congress passed Obama’s plan to extend tax cuts on just the first $250,000 in household income, the average tax cut for Illinois taxpayers who make more than that amount would be about $14,000. The 25 percent of Illinois taxpayers with income up to $25,000 would get larger tax cuts under the Obama plan than under the Republican plan.

“The GOP plan will cost approximately $68 billion [nationwide] next year alone,” says Sean Crowley of Americans for Tax Fairness. “That’s equal to what the federal government spends to repair highways, improve education and provide school breakfasts for low-income children, ensure clean drinking water, and deliver meals at home to frail seniors.”

Mark Zandi, a Moody’s economist testifying before Congress, said that for every $1 government invests in aid to states, $1.34 in economic growth is generated. However, Illinois’ share of such federal cuts would affect spending in the following programs (which now receive these federal funds here): highways ($1.3 billion), K-12 education ($631 million), Head Start ($315 million), school breakfasts ($107 million), safe drinking water ($97 million), and senior meals ($8.2 million).

“We can’t afford to keep giving tax cuts to the richest,” says Frank Clemente, also with Americans for Tax Fairness. “We can’t balance the budget on the backs of children, seniors and families struggling to make ends meet, and we can’t keep borrowing from China. Those who have done well in America should do well by America and pay their fair share.”

More than 96 percent of Illinois taxpayers earn less than $250,000 a year, averaging $59,920; about 3 percent receive more than $250,000 and average $744,180 annually.

“It’s a high-stakes gamble,” said Samuel, from the AFL-CIO. “The responsible thing would be to let the tax cuts expire and then close the loopholes” with tax reform in the next Congress.

“But I don’t put a lot of faith in the leadership of this Congress being responsible,” he added.

The 8-page report is online at http://www.americansfortaxfairness.org/files/IL.pdf