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 Gov. J.B. Pritzker is promising more than he can deliver,
subjecting Illinois’ middle class to the threat of future tax hikes.
The first-term governor carried a wealth of costly commitments from the campaign
trail into office. This includes: closing the structural budget deficit,
lowering or freezing property taxes, increasing funding for education, reducing
the state’s massive pension liability and paying down its unpaid bill backlog.
Together, the cost of those noble goals totals more than $10 billion annually.
Unfortunately, that’s far more than the state would be able to manage using the
governor’s proposed revenue source: a graduated, or “progressive,” income tax
system.
Pritzker’s “fair tax” plan would bring in just $3.4 billion, according to his
own administration’s projections. That comes nowhere near the revenue needed to
deliver on his spending promises, leaving middle-class families on the hook to
cover the shortfall.
 Below is a list of the individual costs for each of Pritzker’s spending
proposals:
Closing the structural deficit ($1.9B)
When Pritzker unveiled his “fair tax” plan, he claimed it would “eliminate the
budget deficit.”
The earliest the state could generate revenue from a progressive tax is fiscal
year 2021, pending the outcome of a November 2020 voter referendum on the
measure. The Governor’s Office of Management & Budget projects the deficit will
be $3.4 billion in fiscal year 2021.
A portion of the cost will be covered by revenues from Pritzker’s 21 new taxes
and fee hikes, amounting to around $1.5 billion, which will lower the fiscal
year 2021 deficit to $1.9 billion.
Those projections include several optimistic revenue estimates, including $500
million in marijuana revenue. That projection is very generous given the
restrictions and regulations on the new industry. However, to give the
governor’s income tax plan the benefit of the doubt, this analysis uses the most
favorable estimates.
Paying down the unpaid bill backlog ($1.8B)
In a March press conference, Pritzker listed “[paying] down the backlog” of
unpaid bills as one of the primary goals of the progressive income tax. Illinois
currently faces a bill backlog of more than $6 billion.
Pritzker issued $1.2 billion in bonds for the bill backlog, which will cost
roughly $191 million annually to finance. All else being equal, this should
reduce the bill backlog to around $5 billion, which comes out to $1.7 billion
per year divided over the remaining three years of Pritzker’s term. Financing
the bonds and paying down the rest of the backlog will cost $1.8 billion alone,
swallowing at least half of the revenue from Pritzker’s progressive income tax
proposal.
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Reducing pension debt ($200M)
Among the most ambitious of Pritzker’s promises is to use the
progressive tax to “reduce the state’s pension liability.”
Pritzker said he would dedicate $200 million to fund pensions. This
would fall far short of fully funding the state’s pension system,
not to mention the cost of financing its pension obligation bonds.
Together, those costs could total between $300 million and $1.5
billion.
These costs bring the bill for Pritzker’s promises up to around $3.7
billion – already exceeding the projected revenue his “fair tax”
plan would generate. Using even slightly less optimistic estimates
would quickly put Illinois much further in the red.
Increasing education funding ($6.4B)
Although Pritzker has offered few details about how his progressive
tax hike would fund his education plans, he frequently tied
education funding to the need for a “fair tax” in debates and
campaign ads.
Pritzker also promised to “lower or freeze property taxes” with the
enactment of a progressive income tax. As the state has slowed its
spending for schools, local governments have hiked property taxes to
make up the difference. Pritzker has claimed he’d use progressive
tax revenue to both increase education funding and deliver property
tax relief.
The Illinois Policy Institute pegged the cost of fully funding
education at $6.7 billion. However, Pritzker used other revenue
sources to increase the funding formula by $375 million in the last
budget, bringing the amount needed to fully fund education down to
around $6.4 billion. Adding increased education funding brings the
total cost of Pritzker’s promises to $10.3 billion.
The real cost ($10.3B)
Springfield has shown that spending beyond its means always leads to
the same outcome: more tax hikes.
As Pritzker proposes paying for $10 billion in new spending with a
$3.4 billion tax hike, Illinois’ middle class will eventually suffer
income tax hikes under a “fair tax” system to cover the shortfall.
This total does not even include some of Pritzker’s more expensive
promises, including universal preschool or a public option for
health care. These proposals would require billions more in new
spending.
Under Pritzker’s “fair tax,” Springfield would have the ability to
hike income taxes one bracket at a time, shielding lawmakers from
the political backlash they face raising taxes on all Illinoisans
collectively under a flat rate.
Middle-class taxpayers need not look further than Pritzker’s own
spending promises to see the true cost of a progressive income tax
in Illinois.
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