A Better Illinois: The Case for the Fair Tax to Help Solve the Illinois Fiscal Crisis

Transcription

1 A Better Illinois: The Case for the Fair Tax to Help Solve the Illinois Fiscal Crisis John Bouman, President Sargent Shriver National Center on Poverty Law Kankakee, Illinois January 2014

2 The General Funds Budget Disclaimer: numbers here not precise; focus on concepts and magnitude General funds checkbook = $34-35B Whole budget = about $66B General funds budget is 90% healthcare, human services, education, higher ed, public safety Balance is capital spending and special funds (e.g., road fund)

3 Major General Fund Spending (2013) Fixed costs (debt, pension): $9.3B Pre-K to 12 Education: $6.9B Health Care: $6.7B Human Services: $4.1B Government Services: $2.1B Public Safety: $2.1B Higher Education: $2.0B Total: $34.2B

4 Major General Funds Revenues (2013) Individual Income Tax % Sales Tax % Federal Sources % Corporate Income Tax 7.4% Public Utility 3.2% Lottery and Riverboat Gaming 2.9% Other 8.1%

5 Structural Deficit Revenue Problem Historic consensus on spending priorities Spending trending down Revenue system poorly designed both inadequate and unfair Inadequate: revenue does not grow with inflation; thus increasingly behind spending inflation alligator jaws Unfair: among most regressive in the nation; lower inc. taxpayers pay 2-3 times higher pct. of their income than higher inc. taxpayers 5

6 Consequences of Structural Deficit Unpaid bills First Blagojevich budget cites $5B deficit Nationally lowest state contribution to public education (pressure on property tax) Over-borrowing Cut human services staff and programs Fail to meet needs or make key investments Gimmicks: lottery, sell the lottery, gambling boats, sell the toll way, fund sweeps

7 Cuts Since 2000 (adjusted for inflation) P 12 Education: 12.35% Overcrowding, fewer pre-k slots, property tax pressure Higher Education: 40.28% College out of reach, student debt Human Services: 32.98% Lost mental health services, programs closing Public Safety: 22.82% Quality of life, personal safety AND WHAT ISN T CUT, ISN T PAID ON TIME

8 That was before the recession Chronic crisis became train wreck Mounting unpaid bills ($8B expected) Annual cuts to important human services Responsible Budget Coalition balanced response Medicaid cuts Budgeting for Results Pension reform process 2011 temporary income tax increase

9 Was the temporary tax increase worth it? Deficits with and without (billions) No Tax Inc. With Tax Inc

10 Would continuing the tax increase fix the No structural deficit? Deficit would be smaller but the same structural problem would ensure that it constantly grows.

11 A fiscal cliff looms this year 1.25% of the 2011 income tax rate increase expires January 2015 Halfway through the coming fiscal year $2B lost in FY15 $4.1B in FY16 $4.6B in FY17 Unacceptable cuts!

12 Fiscal Cliff Actions Immediate FY15 problem RBC principles Resist major cuts Fairness in cuts and revenues Address the short term problem (extend the temporary tax?) But remember there s a long term problem Adequacy enough to get Illinois out of the crisis, pay bills, keep promises, make smart investments

13 Fair Tax Long term that s consistent with short term People with lower income pay a lower rate, people with higher income pay a higher rate Like the federal income tax Grows more naturally with the economy to keep pace with cost of living Even if revenue increase, not a tax increase for all Thus addresses the structural deficit AND the fiscal cliff

14 Top Income Tax Rates in Other States All surrounding states except IN have fair tax Iowa: 8.98% Minnesota: 7.85% Wisconsin: 7.75% Missouri: 6.0% Kentucky: 6.0% California: 12.3% New Jersey: 8.97% New York: 8.92%

15 Illinois needs fiscal stability Business climate research shows that state and local taxes are a modest factor More important: Stability and predictability in state government Educated workforce Good healthcare Strong transportation and infrastructure Good services Competent management Good credit rating

16 Illinois needs balanced pragmatism Those not in need are helped when the problems of those in need are addressed Educated workforce More consumers and entrepreneurs Healthier and safer communities Moral standards kept Quality of life and equality of opportunity are values that apply to all Pragmatic problem-solving beats ideological gridlock

17 Legislative Phase for Fair Tax Pass resolution with 60% by May 4 SJRCA co-sponsors, 36 votes needed HJRCA co-sponsors, 71 votes needed Over 100 allies in A Better Illinois Polling shows a path to passage Activities in targeted districts Coordinated effort in Springfield Need MORE

18 Electoral Phase and Thereafter If resolution passes, then on ballot in Nov 60% of those voting on the measure, or 50% of those voting in the election Amendment ALLOWS Fair Tax General Assembly needs to pass it Lame Duck session likely to be short term and long term (FY15 and reform)

19 Citations The Illinois State Budget and Tax Primer, Center for Tax and Budget Accountability, available at Fiscal Policy Center s Statement on Budget Forecast from Governor s Office, Voices for Illinois Children, Fiscal Policy Center,

20 A Better Illinois -- Sign up your organization, church, business -- Learn and educate -- Participate!