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What's fairest tax for Illinois? You decide

Quad City Times

Wednesday, June 13, 2018  |  Article  |  John Donald O'Shea

Taxes, Graduated/Progressive

You have just been appointed “supreme dictator” of the state of Illinois, and authorized to rule by decree. So, what’s your tax policy?


Sadly the state’s last governor and the members of the Legislature have left you with a god-awful mess.


Illinois has five major pension funds. As of June 2017, Illinois’ unfunded pension liability reached $137 billion. Each Illinois resident owes about $10,500.


In 2017, unpaid Illinois bills reached just under $17 billion. The law requires the state to pay 12 percent interest on bills unpaid after 90 days. A $6.5 billion bond issue was used to pay a portion of those bills. In April of 2017, Illinois still had $7.4 billion worth of bills to pay. Of course, principle and interest also will have to be paid on the bonds.


So Mr. Dictator, where do you start? You have two good friends — principle advisors. One’s a raving Clinton/Sanders progressive (CS). The other, a trumpeting Trumpist (TT).


CS: “The whole reason for this fiscal mess is that Illinois does not have, unlike the U.S. and many of our neighboring states, a progressive income tax.”


TT: “Hogwash!”


CS: “If only we had a graduated income tax, we could solve all Illinois funding problems. Illinois presently has a flat-rate income tax which was increased from 3.75 percent to 4.95 percent on individuals, effective July 1, 2017. Even so, the flat-rate income tax simply does not generate enough revenue to meet the state’s financial problems.”


TT: “Illinois has plenty of revenue. The problem is that the political hacks in the Legislature choose to spend more than they collect in taxes. You can’t blame Republicans for that. They’re virtually extinct in Illinois!”


CS: “It is also a fact that a progressive income tax (aka, graduated income tax) is fairer. Under a flat-rate tax, if a rich guy has net income of $100,000, he’d pay $4,950 in Illinois personal income tax. The poor guy with a net income of $10,000 would pay $495. That simply isn’t fair.”


TT: “Rich guy has 10 times the income; he pays 10 times the tax. What’s unfair about that? Does rich guy consume 10 times the public services? Is rich guy’s vote weighted so as to count 10 times as much as poor guys? What would be fair for you? Should rich guy pay 10 percent while poor guy pays 4.95 percent? Or 20 percent while poor guy pays nothing? Or is that too fair?”


CS: Illinois’ lack of a progressive income tax has contributed to Illinois budget deficits!


TT: “You just told us that the U.S. has a progressive income tax, and you claim a progressive tax would allow Illinois to avoid deficits. Are you unaware that during President Barack Obama’s eight years, the average federal deficit was $816 billion?


CS: “Illinois has woefully funded its public education! This has forced school districts to continually raise property taxes to make up for deficits!


TT: “Forced? We could give the schools a blank check, and they’d still want more money! Have your forgotten the recent 1 percent school tax increase you touted last fall?” Then assuming the offensive, TT queries, “Once we get your progressive tax, what stops the poor from exploiting their political power so as to increase taxes on the rich while lowering or abolishing their own taxes?”


CS: “That will never happen! You’re fear-mongering!”


TT: “Really? The United States government has had a progressive tax system since 1913. Are you aware that the top 1 percent of federal income taxpayers pay 39.5 percent of all individual income taxes, and that the top 5 percent pay 50 percent of all individual federal income taxes? Are you aware that the bottom 50 percent pay 2.8 percent? That over 76 million U.S. households — 45.3 percent of all households — pay no federal income tax? What’s fair about that? And even worse, to get votes, pandering politicians exempt the poor from paying any federal income taxes. How is that fair?

“We had a war over ‘taxation without representation.’ Representation without taxation is even worse! It encourages class warfare. The poor don’t want to pay any income tax, so they tell their friends in the Legislature, ‘tax the rich! The top 5 percent paying 50 percent of all income taxes aren’t paying enough! It isn’t fair’!”


So, Supreme One, what’s your tax policy?


‘Rich guy has 10 times the income; he pays 10 times the tax. What’s unfair about that?’

John Donald O'Shea of Moline is a retired circuit court judge.