Bill Knight column for Mon., Tues. or Wed., Dec. 26, 27 or 28, 2016
What’s worse than “tax-and-spend” governing is “spend-and-spend.”
Without adequate revenues to fund programs people want, financial disaster looms.
There hasn’t been a state budget since July 2015, and Rauner continues to make demands before he’ll present one to lawmakers. Earlier this month, he issued an ultimatum to the legislature and called it a compromise. The Republican billionaire said he’d agree to another stop-gap budget if lawmakers passed a property tax freeze requiring communities to go to referendum when they wanted to raise property taxes, and term limits through a 2018 referendum.
Balancing revenues and expenditures CAN be done.
“Illinois can really change from being an anomaly – one of the few states with a flat income tax – to one of the vast majority of states that have a fair tax where different rates apply to different rates of income,” said David Lloyd of at Voices for Illinois Children.
Plus, it HAS been done. California in 2012 raised taxes to 13.3 percent, and its economy has prospered (up 4.1 percent last year). That contradicts the belief that tax hikes cause companies to flee, and only tax cuts or corporate subsidies spur growth.
The world’s sixth-largest economy, California’s geography, industries, culture and demographics are different than Illinois, of course. So maybe more pertinent is Minnesota, where another billionaire governor working with a legislature controlled by the opposition party, Democrat Mark Dayton, led a REAL turnaround since taking office in 2011. The Republican legislature compromised and raised taxes to 9.85 percent for annual incomes of more than $150,000. Also, Minnesota raised the minimum wage (to $9.50 by next year), approved online voter registration, and mandated equal pay for woman. The results include adding 170,000 jobs in four years and in the last few years, Minnesota and California have been listed as two of the nation’s fastest-growing economies by the U.S Bureau of Economic Analysis, which considers manufacturing, construction, mining, agriculture, wholesale trade, and finance & insurance sectors.
Meanwhile, Kansas – trying trickle-down economics – grew at just 0.2 percent in 2015. There, Republican Gov. Sam Brownback slightly increased taxes on the poor and working class (who pay more in sales taxes and income taxes), but cut them for the wealthy.
“States dominated by Republicans embrace cut and extract – cut taxes and business regulations, including on the extraction of natural resources,” wrote political scientists Jacob Hacker of Yale and Paul Pierson of the University of California, Berkeley, authors of “American Amnesia: How the War on Government Led Us to Forget What Made America Prosper.”
“States dominated by Democrats do much more to maintain their investments in education, infrastructure, urban quality of life and human services — investments typically financed through more progressive state and local taxes. Blue states are generally doing better.”
Blue Illinois could still add revenues, with political will in Springfield.
The groundwork was laid two years ago, when 59 percent of voters cast ballots in a non-binding referendum to raise taxes on annual incomes of more than $1 million to 8 percent. Also, in 2011 Illinois raised income-tax rates from 3 percent to 5 percent, but it was a temporary measure that expired when Rauner blocked its renewal.
“No state has ever lost revenue by raising taxes on rich people,” Michael Mazerov of the Center on Budget and Policy Priorities told USA Today. “There might be a small amount of induced migration, but we have very powerful research now from New Jersey and California and Montana showing that raising taxes on millionaires does not lead to a significant uptick in the number of people who leave. On balance, the states raise a lot of revenue.”
Changing from Illinois’ constitutionally mandated flat tax would require an amendment. That needs either a constitutional convention if 60 percent of the members of both houses of the Illinois General Assembly vote to place a constitutional convention on the ballot and voters approve it, or the legislature referring an amendment (again, if 60 percent of both houses vote to put it on the ballot, with some limits, including collecting the equivalent of 8 percent of votes cast for governor in the most recent election) and it’s approved by 60 percent of those voting on the question, or a majority vote of those who cast a ballot for any office in that election.
Not easy, but smarter than spending and spending. Planning and acting is better than acting without planning – with political will in Springfield.
[Graphic from bettergov.org.]