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 Gov. J.B. Pritzker has already walked away from his “fair tax”
proposal’s signature promise of middle-class tax relief. A new report
documenting other progressive tax states might help explain why.
The Center for Tax and Budget Accountability, or CTBA, is one advocacy group
backing Pritzker’s progressive tax push. Their most recent research strengthens
the case against the governor’s proposal.
Progressive tax states don’t always hike taxes, according to the report, but
when they do, the middle class is by far the most frequent target.
The report’s central finding is that states under a progressive income tax
structure “are more than twice as likely to cut taxes” than raise them. This
would be encouraging news for Illinois’ middle class if progressive tax
advocates weren’t floating the plan as a means for raising more revenue.
Unfortunately, CTBA’s analysis shows that in the instances in which progressive
tax states raise income tax revenue, the middle class overwhelmingly pays the
price.
Since 2003, there were 33 tax hikes on income below $250,000 compared with only
10 increases on income above $250,000, according to CTBA. This directly
contradicts CTBA and the governor’s narrative about how a progressive tax system
would impact differing socio-economic groups. It does closely follow how the
middle and lower classes have fared in the years since Connecticut swapped its
flat tax for a progressive tax structure, the only state in the past 30 years to
do so and as other states recognized progressive taxation’s destructive economic
impact.
Connecticut transformed its income tax system under fiscal pressures similar to
that of Illinois, and did so with similar goals. In other words, Connecticut
offers a far more accurate comparison than does lumping together all progressive
tax states.
CTBA’s analysis, for example, includes states such as Georgia, Idaho, Arkansas
and Louisiana, whose progressive taxes are effectively flat because their top
rate applies to the majority of those states’ income earners. That’s a far cry
from the rate structure Pritzker and state lawmakers have proposed, and it’s why
PolitiFact labeled as “mostly false” the claim that progressive tax states
generally tax the wealthy at a higher rate.
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What CTBA’s research makes clear is this: While
progressive tax states don’t always raise taxes, when they do, it’s
the middle class that suffers.
And if Pritzker truly expects to finance his ambitious spending
promises, on top of his goal of closing Illinois’ deficit and
increasing spending, taxes on the middle class inevitably will go
up. An Illinois Policy Institute analysis found that the typical
middle-income family would have to endure a tax hike of up to $3,500
to fund those promises.
CTBA executive director Ralph Martire has himself admitted the
governor’s proposal wouldn’t raise the revenue needed to deliver
Pritzker’s promises, creating the likelihood of new or higher taxes.
In reality, the only way to provide real, lasting tax relief in
Illinois is by addressing the root cause of the state’s persistent
tax hikes. Namely, that is the unsustainable growth in public
pension costs, which now consume more than a quarter of general fund
revenues.
A progressive tax system in Illinois would fail to address the
state’s most urgent fiscal crisis, leaving public employees’
retirement security in jeopardy and threatening taxpayers with
future tax hikes. Only through constitutional pension reform can the
state avoid those threats. Fortunately, the Illinois Policy
Institute’s Budget Solutions 2020 plan would help the governor
achieve his worthwhile goals of fiscal stability and middle-class
tax relief.
Pritzker should listen to the growing number of voices opposing his
“fair tax” amendment, which CTBA’s research again shows would
quickly prove unfair to the middle class. His goals and Illinois
would best be served by a constitutional amendment that would
protect already-earned pension benefits but allow for changes to the
growth of future, unearned benefits.
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