IPI's Pritzker tax fantasy debunked

Not all taxes are bad taxes, but neither are all details on tax reform

A right-wing group has put words — and scary cost estimates — in J.B. Pritzker’s mouth on his proposal for a graduated income tax. (One Illinois/Ted Cox)

By Ted Cox

If you can’t say something negative about a candidate — and, quite frankly, that wouldn’t appear to be a problem this election season — then just make something up.

That seems to be the approach of our counterparts at the Illinois Policy Institute, who recently produced a study which basically insisted that, if Democratic candidate for governor J.B. Pritzker wouldn’t offer specifics on his proposal for a graduated income tax, they’d do it for him.

Holding Pritzker to elevated expectations that he’d solve the state’s pension crisis — a conundrum governors of both parties have been dodging for decades — and craft a much-needed major capital bill for infrastructure — something even a tax hawk like Gov. Rauner grants is necessary, even as he shows no clue for how to achieve it — all at the same time and solely through taxes, the IPI finds that Pritzker’s tax plan would have to raise revenue by $13 billion to $18 billion.

For a state of 12.8 million people, not all of them wage earners, that’s genuinely scary, but then again the IPI isn’t shy about its aversion to taxes of any kind, and it likes to scare voters into supporting candidates with a similar aversion.

Sometimes it seems it’s no coincidence that election season falls at Halloween.

Also see IPI ally Dan Proft’s stealth campaign to saveyourhomenow.org, which touts Republican anti-tax candidates as a nonpartisan effort to hold down property taxes, without bothering to point out they’re Republicans.

Look, at One Illinois it’s not our mission to defend Pritzker’s tax policy, although we do believe it’s entirely reasonable that he resists specifics early on, stating only that he favors a fair progressive tax and that the details should be worked out between both Republicans and Democrats in the General Assembly and then presented to the voters as part of a referendum that is necessary in any case to alter the state constitution and end the regressive one-size-fits-all flat tax rate.

But we have decried Rauner’s persistent lies that a progressive income tax would automatically raise taxes on the middle class — a position the Better Government Association proved was false — and we’re not afraid to wade in on at least a few tax details.

Crain’s reporter Greg Hinz wrote a story this week on the IPI study, and while he did a generally splendid job of debunking it, he was also on point in suggesting that Pritzker invited the attack by never getting specific at all about his tax plan.

That’s entirely valid. There are basic positions that could be established and built upon as a foundation for a new, fair, progressive income tax. Pritzker has cited that 32 states, as well as the federal government, all have graduated income taxes, setting higher tax rates for those who earn more and thus have more ability to pay.

But he’s slow to point at neighboring states like Iowa, which has nine tax brackets peaking at 8.98 percent, and Minnesota, which has four peaking at 9.85 percent, as examples that can be studied and emulated, with modifications that serve Illinois best.

At One Illinois, we’ve already pointed to how state Rep. Tony McCombie of Savanna has figures showing that, for a family of four with the head of the house making $150,000 and with a $250,000 home, Quad Cities residents in Rock Island and Moline pay less overall in taxes than residents across the Mississippi River in Davenport and Bettendorf, with Davenport residents paying the most and only East Moline edging ahead of Bettendorf on the Illinois side. Yes, Illinoisans pay more in property taxes, because of the inequitable way the state funds education, but that’s more than made up for at that income level by Iowa’s higher income taxes.

Former state Sen. Denny Jacobs of East Moline has also pointed out that many Iowans retire to Illinois, because our state doesn’t tax retirement income.

Similarly, Frank Manzo IV, of the Illinois Economic Policy Institute, recently told us that his studies have shown that an Illinois family with an adjusted gross income of $75,000 would pay less under the Minnesota tax system than under the current Illinois flat tax rate of 4.95 percent. The same would go for individuals making $60,000.

Manzo also testified before the General Assembly earlier this year on a graduated income tax. Working from a proposal put together by the Center for Budget and Tax Accountability, he stated that creating a tax system lowering the rate to 4.5 percent for those making less than $100,000, keeping it level at 4.95 percent for those making $100,000 to $300,000, and creating three additional brackets for those making more than that, ranging from 8 to 9.85 percent, would cut taxes for the vast majority of Illinoisans and raise billions of dollars.

“This proposal would cut taxes for 98 percent of Illinois taxpayers, raise them on the richest 2 percent of Illinois tax filers earning $314,000 or more, and generate about $2 billion in revenue to help close the state’s structural deficit,” Manzo testified. “This proposal would stimulate consumer spending by raising taxes on the rich and lowering them on the bottom 98 percent, who spend a higher portion of their incomes back in the economy.”

That seems to us like a good, solid jumping-off point for a debate on the Illinois income tax. And Pritzker ought to be able to say the same without being subjected to the scare tactics of those who believe that any tax is a bad tax.