too little tax money

The Fair Tax Failed–Now What?

Much to the dismay of Chicago progressives, the state ballot initiative to create a graduated income tax, or “fair tax,” failed on Election Day. Had the initiative passed, it would have opened the door to create higher income taxes on people who make more money and lower income taxes on people who make less money. Though this might sound like a no-brainer, and we already do it at the federal level, back in 1969 and 1970, when Illinois first instated an income tax,  folks of all political persuasions were unsure whether voters would accept more than a low, flat tax on income.

Although the political landscape has changed somewhat since those days, people still don’t like paying taxes. Especially when they don’t trust their government to put it to good use. Thus, to the surprise of no one who has followed state politics for more than a minute, except maybe Gov. J. B. Pritzker himself, folks beyond Cook County were in no mood to hand House Speaker Michael Madigan and the rest of the statehouse any more cash.

But I’ll spare us all any more whining about the weak messaging from advocates and the disinformation and half-truths from opponents. I’ll stop crying about the $100 million dollars wasted on ads for an amendment some smart folks didn’t think was well-written in the first place.

Nope. Now’s the time to ask ourselves, “What’s next?”

In a state as broke as Illinois, it’s hard to imagine things could get worse. But they could. And it’s happening right now, thanks to the economic problems associated with the pandemic. 

The state’s current backlog of unpaid bills has reached $9 billion.  While that’s a lot less than the $16 billion-dollar backlog Illinois hit back in 2017, when Gov. Bruce Rauner and the Democratic state legislature were duking it out to the point they couldn’t agree on budgets, it’s not good. 

While Gov. Pritzker is protecting schools from budget cuts this year, they face more expenses due to the pandemic. Also, we’re now off the track we recently launched toward adequate funding for every school in the state. It has only been three years since Illinois retooled the way it sends state funds to school districts, increasing fairness and setting targets for how much money it would take to even out the astounding inequities in resources that hit hardest in the poorest parts of the state, both urban and rural.

It will take billions in new money to achieve fair and adequate funds for all Illinois schools. So far, we’ve begun that investment, but not nearly fast enough. Now, it has been halted. And, without more revenue, cuts to school funding are practically inevitable.

Robin Steans, president of Advance Illinois, a statewide advocacy group for high-quality, fairly funded schools, warns, “Every five percent [of the state budget] you cut is $350 million. If you cut [schools] 15%, we’re back to where we started” when it comes to funding. In other words, right back to square one—the most inequitable funding system in the entire country.

That would be a terrible outcome for long-impoverished schools all over Illinois, which were just beginning to benefit from the state’s 2017 revamp of how it distributes tax dollars to schools.

So where’s the money going to come from? Most likely, an across-the-board hike on income taxes. “The likelihood that a general increase to the income tax rate is coming I would peg as very high,” says Drazzel Feliu, research director for the Chicago-based Center for Tax and Budget Accountability

In other words, instead of getting a graduated income tax, where people with higher incomes would pay more, we’re getting a flat tax increase, that hits all of us hard, and the folks with the least, the hardest.

But it is just possible that legislators could find a back-door method of creating a graduated tax by coupling that across-the-board increase with a massive expansion of the state’s earned income tax credit. 

If they go this route, watch for it early in the new year. Earlier this week, due to rising rates of Covid-19, the Illinois General Assembly canceled its usual “veto session” in November and December. Instead, they will convene after the New Year for a “lame duck” session to handle unfinished business before the current term ends, on January 13, 2021. 

The other flicker of hope here could come from Washington, D.C. once President-Elect Joe Biden takes office. But it won’t happen without a cooperative Senate willing to pass another economic stimulus package. “Illinois is not unique in the challenges it’s facing,” says Feliu. “If the Democrats take over the Senate and have a majority, there’s likely to be some stimulus program for the states.”

I suspect that Chicagoans are more likely to send postcards to Georgia voters than to their downstate neighbors. But, to start our state on a better path, it will take both federal help and some kind of Springfield workaround to get us the effect of a graduated income tax.

Photo by Michael Longmire on Unsplash.

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Maureen Kelleher

Maureen Kelleher

Chicago Unheard blog manager Maureen Kelleher also serves as a senior writer and editor at brightbeam, a nonprofit network of education activists demanding a better education and brighter future for every child. Before joining the brightbeam team, she spent a decade as a reporter, blogger and policy analyst. Her work has been published across the education world, from Education Week to the Center for American Progress. Between 1998 and 2006 she was an associate editor at Catalyst Chicago, the go-to magazine covering Chicago’s public schools. There, her reporting won awards from the Annie E. Casey Foundation, the International Reading Association and the Society for Professional Journalists. A former high school English teacher, she is also the proud mom of an elementary student in the Chicago Public Schools. Find her on Twitter at @KelleherMaureen.

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