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 On Nov. 3, 2020, voters will decide whether to amend the
Illinois Constitution to eliminate the current flat tax guarantee and allow for
the adoption of a $3.4 billion progressive income tax hike. Gov. J.B. Pritzker
has made numerous promises regarding the benefits of this tax plan.
But a look back at Illinois politicians’ history of broken promises regarding
taxpayer money helps explain why nearly half of likely voters in a recent survey
view the plan as nothing but a “blank check” for more taxes and higher spending.
When it comes to tax hikes, broken political promises aren’t unique to one
party. And they’re not unique to Illinois.
The last state to adopt a progressive income tax was Connecticut in 1996.
Proponents made very similar claims to those being used to sell a progressive
tax in Illinois, including middle class tax relief, balanced budgets and no
economic damage. But all of these promises were broken. Instead, Connecticut’s
tax change was followed by a 13% jump in middle class income taxes, a 35%
increase in property taxes, a sharp increase in poverty and continued budget
deficits.
Already, it is clear that Pritzker’s progressive tax math doesn’t add up.
Pritzker has promised at least $10 billion in new spending on what he says will
be $3.4 billion in new revenue. Research from the Illinois Policy Institute has
found that if a progressive tax were used to fully pay for all the new spending
promised by the governor, middle income families could see a tax hike of up to
$3,500.
In each of the following five examples, state lawmakers ultimately misled
Illinoisans about how much tax money they would take or how it would be used.
1) Transportation taxes will fix broken roads and bridges
Transportation infrastructure is generally funded by a “user fee” model of
taxation, with gasoline taxes being the most common example. There are two
essential concepts that make the user fee model work:
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People should pay for road work in relation to how much
they use the roads, because more frequent drivers both benefit more from
infrastructure spending and are responsible for more of the wear and tear.
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Money raised from transportation services should go
directly to transportation costs and not be used to fund unrelated spending.
Illinois politicians have frequently broken the promise of the
user fee model by misusing gas tax revenue and other infrastructure dollars.
From 2002 to 2015, state lawmakers took $6.8 billion from transportation funds
and used it for other purposes, according to the Transportation for Illinois
Coalition. In response, voters overwhelmingly approved a “lockbox amendment” to
the state constitution, with nearly 80% voting in favor in 2016. The amendment
is intended to ensure that revenues related to transportation, such as gas taxes
and vehicle registration fees, can only be used for transportation expenditures.
But while the amendment might give taxpayers some added assurance that revenue
will flow where it is supposed to, raiding the road fund is only one of the ways
lawmakers have historically broken public trust regarding infrastructure
spending.
In 2017, a federal investigation into hundreds of “staff assistant” hires made
at the Illinois Department of Transportation found the agency had for years been
doling out patronage jobs to politically connected applicants. The agency pushed
candidates through the application process with “‘little or no regard’ for
actual hiring need, or whether the candidate was qualified for the job,”
according to the Chicago Tribune.
And in September 2018, the Daily Herald reported the board chair of the Illinois
State Toll Highway Authority awarded a number of six-figure positions to
political allies. The agency had also contracted with firms staffed by
officials’ relatives and former political associates to the tune of hundreds of
millions of dollars.
In other words, transportation revenues have been used to serve the political
ends of government officials rather than for their intended purpose.
The last major capital plan prior to 2019, the 2009 Illinois Jobs Now! program,
was infamous for wasteful projects, such as $670,000 for copper-plated doors and
$500,000 for chandeliers and sculptures, both for the Illinois Capitol building
in Springfield.
Unfortunately, politics and potentially even criminal corruption continue to be
a factor in Illinois’ infrastructure planning.
Pritzker and the General Assembly enacted a $45 billion capital bill in spring
2019 funded by numerous tax and fee hikes – including doubling the state gas tax
– without any controls to ensure projects were picked on merit alone. Illinois
Policy Institute analysis identified at least $1.4 billion in wasteful and
politically motivated spending in the plan. In truth, because Pritzker’s
administration did not release a full list of projects or justification for why
projects were selected, the waste tally could be even higher.
Most recently, a federal investigation involving state Sen. Martin Sandoval,
D-Chicago, has raised questions about potential corruption tied to the new
capital plan. Sandoval was the chairman of the highly influential Senate
Transportation Committee and a key backer of Pritzker’s infrastructure package.
2) Toll free in ‘73
“Toll free in ‘73” was a popular slogan decades ago in Illinois, according to a
2011 report from ABC 7. Politicians promised drivers that tolls would be
temporary. Once initial bond debt for 187 miles of new tollway construction was
paid off, the tollway authority was supposed to dissolve, with continued highway
maintenance funded by the gas tax rather than tolls.
But Illinois drivers are still paying those tolls, which have become a growing
cost.
Revenues exceeded expectations and the original bonds were eventually paid off,
but the tolls still remained on Illinois roadways. Lawmakers made the authority
permanent in 1968, creating the Illinois State Toll Highway Authority that
exists today.
While former Gov. George Ryan revived the promise of ending the tollway in 1999,
that promise ended with his governorship in 2003.
The Illinois Tollway’s budget for fiscal year 2019 was $1.5 billion. That’s more
than double the $680 million budgeted in 2009. A look at the tollway’s revenues
during the past decade, adjusted for inflation, shows just how costly the
now-permanent agency has become for Illinois drivers. Revenues collected from
tolls and fines for missed tolls have gone up 90% in just 10 years.
Over the course of those 10 years, the Illinois Tollway has
hiked toll fares four times. Today, tolls sit at $1.50, up from $0.80 a decade
earlier.
While there is room for debate about the best way to fund highway maintenance,
there is no doubt that today every toll paid serves as a reminder of Illinois
political leaders’ long history of broken promises.
3) The lottery will fund education
When lawmakers first debated and ultimately passed legislation creating the
Illinois Lottery, some of the public opposition to the idea was overcome by
promising the money would be used to fund K-12 education.
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A 1973 newspaper article from The Daily Leader in
Pontiac, Illinois, told its readers that under lottery legislation
recently passed, “the state share [of lottery revenues] would be
used entirely for public schools.” Initially, this promise was
broken because lottery revenues were deposited into the state’s
General Revenue Fund, which pays for far more than just schools.
But in 1985, former Gov. Jim Thompson signed legislation ensuring
all lottery proceeds were deposited directly into the Common School
Fund, which is the portion of the general state budget that funds
public education. As a result, today lawmakers can claim most
lottery revenues are technically “funding education.” Unfortunately,
a closer look shows that the promise of lottery proceeds going to
education is little more than a turn of phrase. As
far back as 1991, the Southern Illinoisan reported that saying
lottery proceeds all go to the Common School fund is “both accurate
and meaningless.” More recently, WBEZ referred to the use of lottery
proceeds by the state as a “shell game.” The main reason is that
inflows from the lottery do not typically represent a net increase
in state spending on education. Instead, lottery money simply frees
up revenue from other sources that would have gone to education, and
lawmakers are able to spend it on other things.
Lottery money never really makes it to the classroom. Instead, those
revenues are more than eaten up by annual contributions to the
teachers’ pension system.
Pension contributions to the Teachers’ Retirement System, or TRS,
are paid from the Common School Fund. For the current budget year,
fiscal year 2020, net lottery proceeds after payouts and expenses
are projected to be $745 million. Meanwhile, the state’s payment to
TRS this year is just under $5 billion.
Lawmakers sealed the deal on this broken promise when in 2009 they
capped the amount of lottery money that would be deposited into the
Common School Fund. All proceeds above and beyond 2009 funding
levels are now diverted to capital projects.
4) 1989 “temporary” income tax hike
Thirty years ago, a different Illinois governor successfully pushed
a different income tax hike through the General Assembly.
Back then, former Republican Gov. Jim Thompson was pushing for the
tax increase while House Speaker Mike Madigan, D-Chicago, initially
stood in its way, according to reporting from the Chicago Tribune at
the time. Madigan eventually came around to supporting a temporary
increase in the income tax rate to 3% from 2.5% and passed
legislation to put it into effect.
Similar to the arguments of tax hike proponents today, new revenue
from the higher rate was supposed to improve state funding for
education and cause local governments to lower property taxes.
The 1989 tax hike was set to automatically expire in 1991, but
lawmakers extended it for two years and ultimately voted to make the
higher rate permanent in 1993.
Taxpayers were subjected to a nearly identical replay of this broken
tax promise 24 years later.
5) 2011 “temporary” income tax hike
Citing budget pressures caused by the Great Recession, former Gov.
Pat Quinn and the General Assembly hiked individual income taxes
again in 2011 to 5% from 3%. Lawmakers went on record making a
number of lofty promises, including:
“We have some temporary tax increases that are designed to pay our
bills, get Illinois back on fiscal sound footing and make sure that
our state has a strong economy.” – Gov. Pat Quinn
“The purpose of this bill is to raise enough money so that we can
continue to pay our pensions without borrowing the money, to pay off
our debt, to have enough money to pay the interest on that debt …” –
Senate President John Cullerton
“… remember the point of this income tax increase is not to expand
programs, not to do brand new things in Illinois state government,
it is only intended to pay our old bills and deal with the
structural deficit.” – House Majority Leader Barbara Flynn Currie
The rate was set to partially sunset in 2014 to 3.75% and fall
further to 3.25% in 2025.
Instead, lawmakers only allowed the partial sunset to occur for two
years, and voted to bring the rate almost all the way back to its
highest-ever level in 2017. The increase to 4.95% was the largest
permanent income tax hike in Illinois history.
Not only did Illinois politicians break their promise that the tax
hike would only be temporary, but the tax increase failed to live up
to the promises made by proponents in terms of actual results, such
as fixing the state’s finances and paying down pension debt.
Pension debt has continued to rise faster than new revenue
collections, and Illinois’ pension debt to revenue ratio remains the
nation’s worst.
 Meanwhile, the state’s deficit in its net position – a measure of
financial health similar to an individual’s net worth – has more
than quadrupled since 2011, growing to negative $189.1 billion from
negative $43.6 billion. Tax hikes are also a leading
cause of the state’s poor growth and make Illinois uncompetitive
with neighboring states. Since the originally “temporary” tax hike
in 2011, all six of Illinois’ neighboring states have cut their
income taxes. It’s no coincidence that other states are better able
to attract investment and grow jobs.
Illinoisans are right to be wary of a progressive income tax
Polls have found that Illinois residents have the lowest levels of
trust in their elected officials in the United States, by far.
Considering how Springfield politicians have regularly broken their
promises on how much taxes or fees would go up, for how long and how
that money would be used, who can blame them?
And while the five examples above represent some of the biggest
broken promises, there are many more instances of lawmakers
violating the public’s trust. Recently, for example, a savings
program to help residents afford in-state higher education by
locking in lower tuition rates, College Illinois, went bust.
A progressive income tax would bring about a series of broken
promises that eclipse anything Illinoisans have seen before.
Contrary to Pritzker’s promises, a progressive income tax will lead
to slower growth in jobs, wages and economic output. Property taxes
will continue to rise. And when new revenue comes up short and fails
to fix the state’s finances, lawmakers aim to raise rates on
everyone, not just the wealthy.
The simple truth is that without pension reform, a progressive
income tax virtually guarantees middle class tax burdens will go up.
Already, the burden of Pritzker’s 20 tax and fee hikes this year
more than wiped out the minimal income tax relief Pritzker has
promised to middle class families under his initial rate plan.
Illinois voters are increasingly wary of tax promises from their
political leaders. Until and unless Springfield adopts reforms that
upend the status quo – such as a constitutional amendment to allow
pension reform and a spending cap that ensures lawmakers don’t spend
more than taxpayers can afford – this mistrust will be more than
justified.
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