Quick Hit Matthew Blake Tuesday February 28th, 2012, 5:15pm

An Alternative Solution To The Illinois Budget Crisis

With Illinois in a perpetual budget crisis and Gov. Pat Quinn proposing deep cuts for Medicaid, pensions, and social services, a Chicago think tank wants to amend the state constitution so the state government can impose a graduated income tax.

The Center for Tax and Budget Accountability released a report today touting the benefits of a graduated income tax. This is compared to the status quo where all residents – from Derrick Rose to your neighbor – pay five percent of their yearly income to the state.

Among the argued for benefits of a graduated, or progressive, tax:

* It would enable Illinois to collect even more revenue than the current flat tax, while at the same time lowering the tax rate for the 94 percent of Illinois residents who make less than $150,000.

* Lowering the tax rate for this 94 percent would spur consumer spending as people of low and ordinary incomes are more likely to spend, than save, each additional dollar they get.

* A progressive tax rate would put Illinois in the mainstream of American tax policy. The federal income tax is, of course, graduated and 34 of the 41 states with an income tax have a graduated tax.

Raising taxes, however, is never politically easy. It is especially difficult in Illinois where the state constitution only allows a flat tax. Amending the constitution would require a constitutional convention, legislative amendment or referendum.

The latter is practically difficult; the first two options require 60 percent approval from both legislative chambers.

Still, Ralph Martire, executive director for CTBA, says that the graduated tax “actually has political legs.”

The reason is that the 2011 income tax increase from three percent to five percent expires in 2015. “They made it temporary and the state knows that they can’t afford to get rid of it,” Martire explains.

So it would be politically popular, Martire contends, to push for a graduated tax: The revenues would stave off painful cuts and the vast majority of citizens would still see an income tax cut.

“There is going to be a lot of organizing in the next couple of years over the need to do this from an economic policy, tax policy, and fairness standpoint,” Martire promises.

Perhaps the most powerful state leader for the graduated tax is Senate President John Cullerton. Cullerton spokesman Ron Holmes notes that the Chicago Democrat was one of 19 to vote 'yes' for a progressive tax in 2008 in the 60-person Senate.

Holmes says Cullerton would support such a measure if it were revived.

Comments

Log in or register to post comments