The stunning thing to me about the battling between Democrats over HB 750 and the GRT is that both reinforce the regressive nature of the Illinois tax system. HB 750 seeks to increase the flat tax on income while reducing property taxes. While I think property tax relief is extremely important in parts of the state, it also tends to be somewhat progressive with notable exceptions of farms and properties in rapidly increasing land values.
Democrats are willing to fight a huge battle over reforming taxes and making them ‘fairer,’ but no one is introducing a proposal to actually make the system progressive.
Everything being said about the corporate loopholes is correct, but the solution is only barely better than the status quo.
The solution for Democrats should be to change the Illinois Constitution and allow for a progressive income tax. In a state that is now strongly blue and has the ability to pass such a change with the strong united voice of state leaders there is no excuse. I am not one for ideological purity in a party, but there is no excuse on a basic issue of fairness like this for any Democrat to try and say it cannot be done.
Also, this would allow a relatively easy fix to the loophole problem that advocates of the GRT keep hyping–use a progressive business income tax on profits and hit large businesses that aren’t paying anything with an alternative minimum tax (AMT) that operates like a GRT as a backup.
The current solutions will simply further institutionalize regressive tax structures. This is an issue that any fool should be able to sell and it’s the right thing. Democrats have won the last two elections, let’s make them count for something.
I think that this would be an ultimate compromise in an ideal world. But it puts off the issue for, potentially, 4 more years (if one was to do it through referendum). I don’t know if the Governor would have any interest in that, but the legislative leaders could do it on their own.
If it isn’t via referendum, it would have to be 2/3 in the GA. The question is – Which Republicans will cross the aisle to give the Governor, Madigan and Emil such a big victory?
That would be the mother of all victories….
I think the GRT line will end up getting pushed higher so that, in the end, it acts pretty much like an AMT for large companies anyway. And I don’t think that would lose much in terms of revenue.
I think one of the Governor’s budget people had mentioned that almost all of the GRT would be paid by businesses over $10 million per year.
That seems to me to leave some wiggle room.
And I’d be willing to see something occur like a increase in the personal exemption on personal income tax (modestly progressive) with some acknowledgment that in the ultimate goal will be more changes. This wouldn’t require any sort of change in the Constitution.
I’m being hard on the Governor, but in the next post I will give him credit for taking the budget situation seriously–I’ve been harping on it since 2002 so that’s fair ;).
Frankly, the person who should lead the effort to get the income tax provision changed is the Lieutenant Governor. He should make that a signature issue for him since it is a populist progressive initiative.
Why not just make the standard deduction ($3K) a credit. That would make a 3% tax on $100K a zero net tax. If you made the rate 6%, no one earning less than $200K would pay any state income tax.
There are two bills pending to amend the Constitution: SJRCA 7 (Sandoval-Frerichs) and HJCRA 23 (Will Davis). These bills should move so that the electorate can amend the constitution in 2008. So there are people proposing a change.