Rauner’s tax fantasy doesn’t add up
The most important question asked of Bruce Rauner during last week’s gubernatorial debate in Peoria was posed by Jamey Dunn-Thomason of Illinois Issues.
My pal pointed out that Kansas Gov. Sam Brownback (R) had cut taxes across the board on the theory that it would boost the state’s economy. His idea hasn’t worked. What’s happened instead is a huge revenue shortfall which has forced gigantic state budget cuts and an economy that now lags the rest of the country. So, what did Rauner think of Brownback’s policy, Dunn-Thomason wondered.
It has seemed to me over the past several months that Rauner is a true believer in “Brownbackism.” He’s proposed slashing the income tax more than four years from five to three percent, without regard for the budgetary pain he would cause, and predicted that doing so would so intensely stimulate the state’s economy that all those lost revenues would magically be replaced by new income from growth.
The idea is a fantasy, and Brownback’s Kansas pretty much proves it.
The hard truth is that pretty much the entire Illinois income tax hike pays for the state’s pension payments. Illinois had kept its tax rate low in comparison with most of the nation for decades because it was skipping and skimping on its long-term pension obligations, which finally led to big trouble with the state’s credit raters. And since the Illinois Supreme Court appears to be in no mood to help the state out on pension reform, the only responsible thing to do is to keep revenues about where they are now in order to avoid a very real disaster in the rest of the budget. You may not like to hear this, but the math is the math.
What we’ve all been hearing out of Rauner to date appears to be ideologically driven nonsense designed to appeal to a gullible and angry public. He absolutely cannot do what he says he’ll do unless he intends to drive the pension systems into bankruptcy, but I’m not sure he can legally get away with that.
Rauner has also pledged big spending increases for P-12 education, higher education, infrastructure, natural resources, corrections and a host of other state programs. How the heck can he do that if he plans to slash state revenues?
I’ve been hearing from some Republicans over the past couple of weeks that Rauner is planning to “pull a Jim Thompson.” Our former governor twice ran on a pledge not to raise taxes, in 1982 and then again in 1986. But as soon as he was safely sworn in, he declared he had not realized the extent of the budget problems and now firmly believed that Illinois desperately needed a tax hike.
Rauner’s proposed expansion of the sales tax to services would only bring in $400 million – a drop in the bucket compared to the billions lost from the income tax hike rollback, and wouldn’t even begin to provide the revenues needed to fulfill his spending promises.
But if you listen carefully, you’ll often hear him say that he hasn’t completely ruled out expanding that new tax to other services.
So, what I’ve been told by people who have regular private contact with him, is that Rauner intends to drastically expand that service tax beyond what he’s claiming now in order to replace some of the revenues from gradually phasing out the income tax hike. He’ll have a “Big Jim Moment” come January, if he’s elected.
OK, let’s go back to last week’s debate.
“I don’t agree with the tax policies that were put in place in Kansas,” Rauner declared in response to Dunn-Thomason’s question. In other words, tax cuts without regard for consequences are not in the cards.
Rauner then returned to his familiar talking points about looking “at the entire tax code” to close corporate loopholes and “broaden the base, lower the rates.” Putting that into context with his Kansas statement, to me at least, supported what I’ve been hearing about what he actually intends to do with the budget next year.
A tax on services will naturally dampen growth and will lower the overall burden on the wealthy, and that’s a totally legit debate to have if it comes to that.
I admit that I’m counting on the fact that he’s lying through his teeth about taxes, and I acknowledge that even a broad service tax will replace only about a third of the income tax cut he says he wants. But when he publicly rejected the Kansas model last week, I breathed a quiet sigh of relief.
Rich Miller also publishes Capitol Fax, a daily political newsletter, and CapitolFax.com.