The State of the State is Not So Great (An Illinois Rant)

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Yes, Illinois Gov. JB Pritzker gave his “state of the state” speech today, and, a year into his term, it’s no surprise that he’s celebrating — and it’s no surprise that I’m skeptical.

What does he say?  Let’s take a look.

Today the Illinois economy supports 6.2 million jobs. This is the most jobs on record for our state, and we now have the lowest unemployment rate in history. . . . Over the past year, Illinois has reduced its unemployment rate more than ALL of the top twenty most populated states in the nation — and more than our Midwestern peers.

Note that phrasing — “reduced . . . more.”  Illinois’s current unemployment rate is 3.7%.  That’s above-average, in a 5-way tie for 31st.  Michigan’s is higher, yes, at 3.9, and Ohio at 4.2.  But Wisconsin is at 3.4, Missouri 3.3, Indiana 3.2, and Iowa 2.7.

237 Illinois businesses from all over the state made Inc Magazine’s List of Fastest Growing Businesses in the Nation.

That’s not all that spectacular in a ranking of 5000 companies; Illinois’s population works out to 3.9% of the total population of the US, and we have 4.7% of the fastest-growing businesses.  Yay, I guess?

Illinois is the second-largest producer of computer science degrees in the nation, accounting for nearly 10 percent of all computer science degrees awarded in the entire United States.

Yes, the University of Illinois is highly ranked in this field, and has actively recruited international (Chinese) students to pay full-price tuition.

Pritzker trumpets the “balanced” budget (however precarious that balance is, relying as it does on one time gambling and pot license fees) and the infrastructure bill (laden with the inevitable pork for Democratic legislators to “give” to their constituents).

He touts apprenticeships — though not as a general program but insofar as public works projects will be required to include, ahem, “diverse employees” (that is, code for underrepresented minorities).

He boasts that pot legalization will “result in 63,000 new jobs” (ugh, again – if these are new jobs rather than newly-legal jobs, then does that mean the state is banking on more people taking up using pot, rather than merely coming out from the black market?), and new “tax revenue from the residents of Wisconsin, Missouri, Iowa and Indiana” (more ugh – it’s in bad taste to plan on enticing out-of-staters to come here to buy produces illegal in their home state).

Pritzker praises the restoration of driver’s licenses for those with unpaid parking tickets and fines, which is worthy enough.  He makes the same claim of having gotten a start on fixing pensions based on two small changes which promise “free money” rather than tough sacrifices.

He praises himself for more changes:

We raised the minimum wage, advanced equal pay for women and minorities, provided millions of Illinoisans relief from high interest on consumer debt, and expanded health care to tens of thousands more people across the state.

Of these, it remains to be seen how rural areas will cope with a high minimum wage. I don’t recall offhand what Pritzker did in furtherance of equal pay (maybe one of those laws that prospective employers can’t ask for past salary history?), I am guessing that the interest relief was an under-the-radar interest rate cap, and I’m puzzled by the healthcare expansion since Medicaid was expanded some years ago with Obamacare.

Working with Senator Andy Manar, we capped out-of-pocket insulin costs at $100 for a 30-day supply so that no one in Illinois has to decide between buying food and paying for the medicine they need to stay alive.

Er, make that, “no one with a diagnosis of diabetes” . . .

We expanded insurance coverage for mammograms and reproductive health.

This is Pritzker’s only reference to his abortion expansion law, in which insurance companies are required to cover abortion.  “Reproductive health,” my a**.  The mammograms bit is, from memory, a matter of requring that insurance companies cover follow-up testing for mammograms without cost-sharing.  Which is fine enough but every insurance coverage mandate boosts premiums, and it’s really not right for legislators to pat themselves on the back as if they’ve made a real difference when they’re just shifting costs in a politically popular way for certain favored ailments.

We stopped bad-mouthing the state and started passing laws that make Illinois more attractive for businesses and jobs. Working across the aisle, we brought tax relief for 300,000 small businesses through the phase out of the corporate franchise tax. And we laid the groundwork for new high-paying tech jobs by opening new business incubators, by incentivizing the building of new data centers, and by investing $100 million in a University of Illinois and University of Chicago partnership that will make Illinois the quantum computing capital of the world.

This is what bugs me:  Pritzker repeatedly makes the claim that what was wrong with Illinois in the past, and what prevented businesses from investing here, was that we were “bad-mouthing the state.”   And then it’s back to the same-old same-old: special tax treatment (“phase out of the corporate franchise tax” . . . “incentivizing the building of new data centers”) and more government spending (“clean energy legislation” which, to my knowledge, consists of some combination of state subsidies and mandates for solar and wind generation, and $100 million based on Pritzker’s say-so).

But at the same time, it is commendable that he spent a significant amount of time addressing corruption, in light of the guilty plea yesterday of former state Senator Martin Sandoval.

And now we have to work together to confront a scourge that has been plaguing our political system for far too long. We must root out the purveyors of greed and corruption — in both parties — whose presence infects the bloodstream of government. It’s no longer enough to sit idle while under-the-table deals, extortion, or bribery persist. Protecting that culture or tolerating it is no longer acceptable. We must take urgent action to restore the public’s trust in our government.

But then he says,

That’s why we need to pass real, lasting ethics reform this legislative session.

But Sandoval and all the other crooks were not engaged in shady, unethical-but-not-illegal actions.  They were actual crooks.  And he addresses that —

Change needs to happen. And much of this change needs to happen outside of the scope of legislation. It’s about how we, as public officials, conduct ourselves in private that also matters.

But this is after a long digression into his commitment to diversity, which leaves me quite skeptical as to whether he really “gets” it or whether he thinks it’s simply time for other groups to have a turn helping themselves to the spoils.

The bottom line for me — and admittedly my opinion counts for squat — is that, because of years upon years of literal corruption as well as indifference to fiscal prudence, Pritzker, as well as, really, any Illinois politician, has a very high threshold to cross to prove that they are working to further the well-being of the people of Illinois, rather than enriching their own pocketbook or making happy the interest groups who have enabled their election, and that they are adequately evaluating the consequences of their plans rather than convincing themselves that liberally spending money is the path to prosperity.

I don’t see anything yet that shows he has earned that trust.  Not the “found money” gimmicks of pot and gambling expansion.  Not the so-called “fair tax” in which, rather than calling for everyone to shoulder increased taxes, he promises that “the rich” will pay for everything, including a (trivial) tax cut for the rest of us.  And certainly not the “infrastructure” giveaways.

So there you have it.  Do you trust Pritzker, or, really, anyone in Illinois government?

What, actually, is a “fair tax”?

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!

 

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