I have promised, in the past, not to make this a political blog. In this remarkable year in politics, though, I think I’m going to have some trouble keeping that promise. I will try to keep it to a minimum. Here is my first foray. Don’t even get me started on Trump.
Illinois is not a poor state. We rank 15th in per capita income in the United States. We exceed every surrounding state in per capita income, median household income, and median family income. Of neighboring states the only one who comes close to Illinois in any of these metrics is Wisconsin who finishes six places back at 21st. Behind Wisconsin is Iowa in 22nd place, Missouri at 33rd, Indiana way back at 38th place, and finally Kentucky near the back of the pack at 46th.
If we were a poor state I might feel differently about the man-made “financial crisis” which has established us as the laughingstock of the country. If we were Mississippi, where the per capita income is in the neighborhood of $20,000 I could explain and justify underfunded schools, decaying bridges, cuts to critical social services, unmowed state parks, and IOU’s issued to schools in lieu of money. If we were a third world country I could understand the governor and the legislature bickering like children about state university funding.
But the truth is, Illinois is not a poor state, sadly we are a cheap state with a very regressive tax scheme. Our per capita income of about $30,000 is 105% of the U.S. average. We really do have the wherewithal to pay our bills, fund our schools adequately, and maintain world class infrastructure. Like so much of our center-right country, though, we simply don’t want to pay for it. But guess what; quality costs money.
The Republican party has convinced people for 36 years that you can have your cake and eat it, too. They have encouraged the mythology that lower taxes for rich people (or job creators as they call them) leads to prosperity for all and, specifically in the case of Illinois, that taxes are too damn high. The common wisdom is that Illinois is a “high tax” state, especially when contrasted with the responsible “Republican Governor” states that surround us. The facts, as often happens, differ from the mythology.
Remember good old Scott Walker, the “tax-cutting, labor-busting, rock-ribbed conservative” from Wisconsin. His state’s income tax rate, according to a 2015 Forbes Magazine study is 66% higher than “high tax” Illinois. On a taxable income of $50,000 Wisconsin residents pay 5.68%. Illinois flat rate is 3.75%. Forbes is hardly hardly a bleeding-heart liberal publication.
In fact, the Forbes survey says that Illinois income taxes on $50,000 were lower than all of our neighboring states except Indiana with a flat rate of 3.3%. (One side note: All Indiana counties tax income as well to the tune of .245% bringing an Indiana resident’s total income tax to 3.545%, pretty close to ours.) On $50,000 Iowa, with it’s Republican Governor-for-life Terry Branstad, taxes it’s citizens at a rate of 5.70%. Missouri’s rate is 5.55% and Mitch McConnell’s home state of Kentucky (our poorest neighbor) taxes 4.03%. (Another side note: Like Indiana several of these states have local and county income taxes which add to their total. Illinois does not. Local and county income taxes in Iowa average .073%, in Missouri .161%, and in Kentucky a whopping .759%.)
“Hold on,” I hear my Republican friends seething, “Illinois has the highest property taxes in the nation.” That is “kind of” true. According to some surveys comparing property taxes to home value we rank 6th, behind New Jersey, New Hampshire, Texas, Wisconsin, and Nebraska. Other recent surveys put us at number 2 behind only New Jersey. That is, I must admit, relatively high. But property taxes are determined by local taxing bodies and fund important local services; schools, snow plowing, and sewers. Property taxes in Illinois are high, in many cases, in response to lost state funding at all levels. If our schools were funded more equitably from state income taxes property taxes could be lower and voters would probably demand that they would be. The fiscal mess in Springfield has forced local taxing bodies to bump-up rates merely to survive. Also, property tax rates vary wildly across the state with some of the wealthiest areas of the state paying the lowest rates and vice versa. In this way Illinois property taxes are even regressive.
Which brings us to the regressive nature of Illinois income tax. In Illinois the poorest taxpayers pay the same rate on their incomes as the richest billionaires, say our Governor, for example. In terms of total taxes it is worse. According to a 2014 Chicago Sun Times article “In Illinois, the state’s poorest residents—those in the bottom 20 percent of the income scale—pay almost three times as much of their earnings in taxes as the top one percent do.” This is not right. Paying 3.75% of your income in taxes is a great deal more onerous if you make minimum wage than if the bulk of your millions comes from capital gains and interest.
So, “liberal” Illinois is harder on it’s poor taxpayers than any of the so-called “conservative” states which surround us. To further exacerbate the problem, funding our schools with local property taxes has led to a huge disparity in educational outcomes between the rich and the poor in Illinois. (See my essay from May 27, 2015 called And the Loser is…) It is high time we shifted school funding in Illinois to an income tax based system and high time that we brought in a progressive income tax to fund it.
To address the fiscal crisis Illinois income tax rates were boosted in 2011 from 3% to 5% (before sunsetting back to 3.75% in 2015). Republicans reacted as if the sky were falling. But the top marginal rate in Iowa (which kicks in at $100,000) is 8.98%. In Missouri it is 6.0%. Wisconsin’s top rate is 7.65%. So the rich in Illinois are doing pretty well despite their belly-aching. This regressive system we have in place has not served us well, either, from a revenue point of view. It has been estimated that if we simply adopted the taxation scheme of Scott Walker’s Wisconsin in its entirety we would collect almost $10 Billion more per year which would more than cover our deficit and allow us to have good roads, good schools, and fund the social safety net programs Governor Rauner has threatened to cut. And would it “kill our economy?” Ask Scott Walker.
Let’s be honest. Nobody likes to pay taxes. It is harmful to tax too heavily. But there is a balance between maintaining world class infrastructure and services and being a third world country. Illinois is on it’s way to being a place people don’t want to live; not because income taxes are too high but because we are perceived as a state in a downward-spiral with poor schools, bad roads, and an embarrassment of a state government. Is it worth paying a bit more to have solvency, quality schools, and a world-class infrastructure? Absolutely. We are not a poor state. We can afford it.
by: Dustin Joy