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Thursday, March 21, 2019 12:14 am

Talking taxation

A bunch of weak political arguments have been used so far against Gov. J.B. Pritzker’s proposed constitutional amendment for a graduated income tax. But there is a clear path to killing it.

My favorite argument was the complaint that the governor is trying to impose a “millionaire’s tax.” That’s precisely the sort of “Won’t everyone please think of the rich people?” reaction Team Pritzker wants desperately to provoke.

Another argument I’m seeing developing is that Illinois is too broke to include the governor’s proposed tax cut for 97 percent of taxpayers, no matter how modest that cut may be.

But in an age when the wealthy are receiving massive federal tax breaks and corporations are regularly handed taxpayer-financed gifts at the state and local levels, arguing against a smallish break for families earning $40,000 a year is political nonsense and also plays right into Pritzker’s hand.

The Illinois Policy Institute is trying to assert that the proposal doesn’t raise nearly as much money as Gov. Pritzker is claiming -- anywhere from about a third to two-thirds less. But that argument makes it look like the Pritzker plan would take far less money away from the private sector than the governor has advertised. It seems counterintuitive.

The claim also undermines the House Republicans’ argument that they stand strongly opposed to a $3.4 billion tax hike. The claim may be useful down the road in another context, however.

Another argument is the tax hike won’t bring in enough money to close the state’s massive structural deficit. But Pritzker’s resistance to calls for even higher taxation will allow him to come off as a moderate, splitting the difference between the left and the right.
Ideas Illinois, the dark money group fronted by former Illinois Manufacturers Association president Greg Baise, has probably the best argument right now against the Pritzker tax plan.
The latest We Ask America poll found that only 23 percent of Illinois voters believe the state is heading in the right direction while 65 percent say it’s on the wrong track. The idea is to feed into that anger by telling people what they already know.
“We really can’t trust J.B. Pritzker or the other Springfield politicians, the same people who in the last eight years have raised taxes twice, to really not take this as a blank check,” Baise said on WGN Radio not long ago.
In other words, this tax plan is just an attractive placeholder that will be replaced by a much more harmful plan as soon as House Speaker Michael Madigan can muster the votes.

The truth is, income taxes are historically difficult to increase here. The tax has been raised just twice since 1989. And one of those increases was a partial restoration of an automatic tax cut.  But some of that tax may not be so difficult to increase if a graduated tax is allowed by the Illinois Constitution. Temporary fiscal downturn? Pension payments rise? Just slap another percentage point or two of taxation on the rich people.

This is the biggest reason why the wealthy are so opposed to a graduated income tax here. And it’s also why a graduated tax would likely protect the middle class from significantly higher rates, no matter what Baise says.

However, because Illinois government is so thoroughly distrusted, the opponents may very well be able to convince enough of the electorate that while the governor may be urging them to vote to tax the rich, they’re really voting to give the hugely unpopular Mike Madigan carte blanche to raise taxes on the middle class.

In that context, using the argument that the tax hike on the rich won’t raise as much money as advertised and the claim that even if the tax hike brings in all the money Pritzker projects, it still won’t be nearly enough to balance the state’s books would serve a useful end: You’re taxing the rich today, but, one way or another, you’re taxing yourself tomorrow.

I don’t believe that prediction is true, but I do believe it could be a very potent argument. 

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