Not the Pritzker proposal for an Illinois tax hike, despite his and his supporters’ claims, actually.
After all, we intuitively know what’s fair and what’s not. Rules which, in theory and in practice, treat everyone evenhandedly are fair. Rules which are arbitrary, or penalize or advantage some people or groups over others, other than for appropriate reasons, are unfair, and all the more so when they are set by a minority without a democratic process (or subverting/manipulating a nominally-democratic process).
The pop tax? Intuitively, it was clear that it was unfair. One group of people (pop-drinkers) was asked to pay a disproportionate share of the county’s taxes, and within that group, some were burdened more than others — those without cars, without storage space, too far towards the center of the county, or otherwise less able to drive elsewhere to get their pop. (Yes, at the time my husband worked in Lake County and until the tax was rescinded he bought the Family Pop Supply on his way home from work. And, yes, if the tax was applied nationwide this specific complaint would be mitigated, but not that of the unfair targeting of pop-drinkers.)
Or consider the gas tax: people are reasonably OK with it if it actually funds road repair. But tell them that the gas tax is being used for entirely unrelated purposes that are nominally transportation-related (Cato reports that Kansas, Maryland, New Jersey, Minnesota, Connecticut, Texas, and Rhode Island each divert over 50% of these taxes in some fashion or another) and taxpayers are less happy.
So what of the Pritzker tax proposal? (For a refresher on the particulars, see my prior article; the latest update on its status comes from today’s Tribune, which reports that the State Senate’s Executive Committee voted along party-lines to approve placing the tax-enabling amendment on the 2020 ballot.) This proposal is being marketed as a “fair tax” to such a degree that the original language of the proposed amendment even used this phrasing. It was cringeworthy:
There may be one tax on the income of individuals and corporations. This may be a fair tax where lower rates apply to lower income levels and higher rates apply to higher income levels.
(Thankfully, the proposal was amended to remove both the current constitution’s restriction on graduated income taxes and this new language about a “fair tax.”)
To begin with, there is nothing intrinsically fairer about a graduated income tax than a flat tax.
What’s more, specific elements in the tax as proposed tend to move it to the “unfair” category. The lack of separate brackets for singles vs. married couples mean that a married couple at a certain income level will end up paying more in taxes than if they had not married. The “millionaire’s tax” that applies for one’s entire income rather than at the margin means that anyone earning $1,000,001 will pay a patently unfair penalty for that last dollar in income. (Comically, the original childish language about the “fair tax” would have prohibited this anyway.) The very fact that the brackets are structured with a dramatic jump in rates, and with a nominal tax cut for moderate earners means that it is being promoted to voters not as the most appropriate way to solve Illinois’ perpetual finance woes, all things considered, but as a way to get something for nothing: “you get all the state spending you want while we ensure that only a tiny minority of people will have to pay.”
I should add that I am increasingly having misgivings about the labelling of this sort of tax as “progressive” and the inevitable pairing with other types of taxes for which lower-income folk pay relatively more, as a share of their income, as “regressive,” because it is becoming clear that these are not descriptive, but are their own forms of value judgements. And, while it might, generally speaking, for taxes to fall disproportionately on those who can better afford to bear their burden, tax terminology should be descriptive, not loaded.
On the other hand, strictly speaking, it might not even be accurate to call the Pritzker proposal a “graduated” tax at all. There are functionally only two brackets, “somewhat less than 5%” and “somewhat less than 8%”, so that there isn’t anything gradual about it. But, yes, that’s a nit-pick.
And practically speaking, I don’t know where the proposal is headed. Certainly it’s not being rubber-stamped, or if it is headed toward such, the process is, at any rate, taking longer than for, say, the minimum wage hike, though it may be that this is just a matter of the lack of urgency (regardless of how quickly or slowly the bill passes, the election at which the amendment would be voted on would take place in 2020) rather than lack of votes. Strategically, on the one hand, it seems a mistake to have a specific proposal rather than saying, “the Illinois constitution wrongly handicaps the state in making its determination of the best type of taxation at any given point in time.” Yet the fact that our state government is so perpetually untrustworthy meant that, practically speaking, no voter in their right minds would accept a plea of “trust me.”
What’s the alternative? Obviously, I’m in favor of a pension-related amendment, and pairing the two would have better enabled politicians to make the claim that these amendments are about long-term good governance rather than short-term coffer-filling. The Tribune went a step further in an editorial today:
Today, a new world: Pritzker would “Let the people vote.”
So how about a package deal, Governor, of amendments or statutory changes: Let the people vote not just on taking more billions of dollars a year from wallets — an amount sure to grow and grow as tax rates rise and rise. Let the people also vote on rewriting the rigid pension clause of the constitution. Let the people vote on term limits. Let the people vote on creating a fair remap scheme.
The pension clause, manipulated by lawmakers eager to reward their cronies in public employee unions, has created much of the financial misery that confronts Pritzker. Lack of term limits has entrenched many of these same lawmakers. And the current remap scheme assures their re-election in perpetuity.
So we’re all agreed, Governor? Taxes, pension reform, term limits, a fair remap scheme. “Let the people vote.”
Sounds good to me!
Image: https://media.defense.gov/2019/Feb/12/2002088973/-1/-1/0/181206-A-UM169-0001.JPG; https://www.dover.af.mil/News/Article/1755127/what-you-should-know-about-filing-2018-taxes/ (public domain/US gov)