Bill Knight | Taxing times



These are taxing times; times we face not just a pubic-health crisis, but higher taxes – or lower levels of public services. Or both.

Nationally, Republicans who backed the 2017 Tax Cuts and Jobs Act are responsible for federal taxes going up sometime in 2021. True, that measure lowered taxes to some degree for many, but it had a “hidden” feature, an automatic tax hike every two years starting this year, increases that in six years will touch virtually everyone to some extent, except those at the top of the economic ladder.

Since the law was complicated, briefly debated and analyzed more than three years (and countless controversies) ago, it’s understandable if it’s been overlooked or forgotten. A refresher: Back then, the law was drafted and approved (with zero Democrat votes) despite the nonpartisan Congressional Budget Office (CBO) forecasting it will increase the budget deficit by $2.2 trillion over a decade. To disguise that, tax increases were built in, so by 2027 when its provisions are all enacted, half the country will get tax cuts and half won’t, with $100,000 the separation.

Nobel Prize-winning economist Joseph Stiglitz in the New York Times wrote, “Republicans – who suddenly lost their grasp on their self-described fiscal conservatism – saw a chance to give their rich friends and corporations a big thank you for campaign contributions. But the tax cuts they promised these donors produced projections [of] budget deficits beyond $1 trillion. To reduce that stomach-churning amount, they had to phase-in higher taxes on ordinary Americans.”

Even long before the pandemic and the lousy federal response to it, the consequences were terrible. The bipartisan Joint Committee on Taxation and the CBO estimated that taxpayers with incomes of $20,000-$30,000 will owe another $365 this year. Keep in mind that the Federal Poverty Level for a family of four is $26,200, so that $365 will some from folks having a hard time feeding their families and keeping roofs over their heads.

In Illinois, the sleight-of-hand was performed by the big-dollar campaign to defeat the Fair Tax amendment and the predictable consequences, financially and politically. And there’s already talk from the Chicago Tribune’s conservative editorial page and Republican legislators that state budget shortfalls should be eased through wage concessions from unionized state workers, another notion that having the affluent pay their fair share is intolerable, but cutting pay from regular working people is OK.

Shortly after voters in November defeated the Fair Tax measure – to substitute a graduated income tax based on individual income for the current “flat tax” that has everyone pay the same, apart from their wealth – Gov. JB Pritzker warned of possible future spending cuts to deal with fiscal woes without that new revenue.

Spending cuts “aren’t things that I can do alone,” he said then. “The legislature has to be right there with us.”
In his State of the State/budget address, Pritzker added, “Two months ago I asked Republicans in the General Assembly for their proposals to close this year’s budget deficit. I was met with silence. Apparently, their idea of bipartisanship ends when hard choices must be made.”

Pritzker’s budget proposal doesn’t increase overall state spending or raise the flat-rate income tax (4.95%).
“This will be one of the most challenging budgets this government has ever had to craft,” he said. “The general funds budget I present today for Fiscal Year 2022 spends $1.8 billion less than FY2021. It reflects $400 million in additional cuts to appropriations, a hiring freeze, flat operational spending, full required pension payments, and the closure of unaffordable corporate loopholes. All in all, it reduces spending to meet projected revenues. This budget does not propose an across-the-board tax increase.”

Despite some $700 million in proposed spending cuts, Pritzker seeks additional spending to the Department of Employment Security ($60 million) and the unemployment system ($73 million) both dealing with the economic fallout from the pandemic, which Pritzker said, “remains our guiding light for this Fiscal 2022 budget proposal.”

Those and other increases in assistance – such as $28 million for MAP (Monetary Award Program) grants to qualified Illinoisans attending approved Illinois colleges – presumably will be helped by closing the loopholes the governor cited, reportedly about $900 million. The legislature will debate the proposed budget, but many will mostly posture.

For instance, Illinois House Minority Leader Jim Durkin, who opposed the Fair Tax, already had blasted Democrats for having previously passed a “budget based on hypothetical revenue and false promises.”

The state has had financial problems for decades, under Democratic and Republican legislatures and governors, from billions in unpaid bills to pension obligations plus the ongoing essential services taxpayers rely on, from schools to state police.

The referendum’s opposition claimed that voting against the Fair Tax was casting a ballot for No New Tax, which was false. Besides, though a graduated tax system would be better, the fiscal challenge is so significant, some tax hike may be inevitable. But whose?

After Fair Tax’s defeat, perhaps everyone’s.

Here are questions for the victorious anti-Fair Tax crowd of Big Business and their Springfield mouthpieces: What services do you favor cutting? If that prospect is unpopular with the people you’re supposed to represent, what new revenue do you instead propose (revenue that Fair Tax would have provided, studies showed)? And drop the worthless comments about “kicking the can down the road,” trimming vague “waste,” or the unconstitutional betrayal of pensioners. Be specific. As for new revenue, relying on gambling and marijuana seems inadequate. Come up with something promising and feasible.

So, Rep. Durkin and GOP colleagues pandering to the anti-tax (something-for-nothing) mindset: Ideas?

What programs would you abolish? Who would you fire? Do you favor eliminating townships that serve rural areas, or social-service agencies vital to cities? Which bridges and roads would you ignore? Which age group will be “de-funded” – children at risk? Schoolkids? College students? Seniors at home or in group settings?

Or are you just against everything, celebrating when regular citizens are struggling, disappointed or angry because you can exploit that for political gain?

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