PI Original Angela Caputo Monday September 28th, 2009, 1:41pm

PJ-Star: Illinois' "Structural Deficit Not Going Away By Itself"

In two weeks the General Assembly will head back to Springfield for the fall veto session. With bills piling up and cuts to popular programs
taking their toll, lawmakers accustomed to sidestepping tough votes are
facing growing pressure to finally address the cause of the ...

In two weeks the General Assembly will head back to Springfield for the fall veto session. With bills piling up and cuts to popular programs taking their toll, lawmakers accustomed to sidestepping tough votes are facing growing pressure to finally address the cause of the state's ongoing revenue shortfalls. "Illinois politicians who believe they can keep doing the same old things while expecting a different result are crazy," the Peoria Journal-Star editorial board declared over the weekend. "This structural deficit is not going away by itself."

As the Commission on Government Forecasting and Accountability pointed out (PDF) back in August, the state's tax policy is clearly outdated. An unwillingness to apply our sales tax to the largest and fastest growing sector of the economy -- services -- cost the state as much as $7.3 billion in 2009.  More from the editorial:

The state's reliance on a flat 3 percent individual income tax - the lowest overall rate of the 42 states with income taxes - obviously isn't getting the job done, and the sales taxes that we do collect still leave us with "one of the most narrow sales tax bases in the country."

Indeed, Illinois' service sector sees only 17 taxes - the fifth lowest in the nation, mainly covering electric, telecommunications and natural gas utilities, plus hotels and car rentals - while other states impose levies on as many as 160 services. Yet the service economy in the Land of Lincoln represents almost 45 percent of the state's business, more than any other state in the region and up dramatically in the last 30 years [...]

[A]t the end of the day, Illinois still faces this reality: State government can't pay its bills. No matter the efforts to whistle past the graveyard, this year's budget is a mess - unconstitutionally unbalanced, as far as we're concerned, to the tune of billions upon billions.

Illinois' flawed tax policy places a far heavier burden on low- and moderate income households than on the wealthy. While taxing services is a step in the right direction, it's only one part of the solution. Expect the emerging Responsible Budget Coalition (PDF) -- comprised of lawmakers, anti-poverty advocates, policy experts, and labor -- to drive this point home as they roll out their new campaign this week. More details will emerge during a kick off rally in Chicago tomorrow (1 p.m. at the  Spertus Institute, 610 S. Michigan Ave.).  But we do know that a revised version of State Sen. James Meeks' HB 174 will be at the center of the effort. In an encouraging sign, Senate President John Cullerton -- who was instrumental in passing Meeks plan in the Senate last spring -- is already showing leadership and will be among tomorrow's key note speakers. We'll be there, so stay tuned for more coverage.

In the meantime, go read the entire Journal-Star editorial here.

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