Next step for Illinois: Graduated income tax
The new fiscal year began this week on July 1, and with it, the 2020 state budget went into effect. This is a budget that, for the first time in years, Illinois can be proud of.
Under the leadership of Gov. J.B. Pritzker and with support from both Democrats and Republicans, the General Assembly passed a budget that funds critical programs our residents rely on and is balanced for the first time in years. A balanced budget means that this year's expenses are paid for by this year's revenues. That seems elementary, but it has not been the Illinois habit for a long time. It is a huge step forward and marks the beginning of a turnaround for the state's finances.
But we have not fixed the structural problem in Illinois finances just because we have managed to make a budget that this year that will not make things worse. There are still billions in unpaid bills, important smart investments with strong long-term savings potential to be made, and a structural problem with our revenue system causing it to fall short every year.
If you take away one-time revenues and other temporary measures, the basic revenue system in Illinois falls short by about $3.2 billion every year of the amount needed just to meet current obligations. The chronic shortfalls in state funding for basic services like education also produce upward pressure on property taxes, as localities in Illinois struggle to support the things that people in other states routinely get from state funding. That kind of crisis cannot be fixed without substantial reform.
The fair tax is that kind of reform. It is a major part of what Illinois needs to end the chronic budget crisis and put our state on track for stable and predictable finances. The fair tax would generate the needed additional revenue by asking the wealthiest residents to pay a fair but higher rate, while everyone else pays the same or a lower rate.
There are two other options to resolve the chronic Illinois budget mess, and neither is acceptable. One option is to raise the needed revenue by increasing income taxes on all residents by 20% regardless of their income. The other option is to eliminate the need for the added revenues by drastically slashing funding for critical services, including education. Both are clear non-starters for the people of our state.
Raising income taxes on all Illinoisans would further burden the middle and lower-income families who are disproportionately hurt by our current tax system. Right now the lowest 20% of families pay nearly 13% of their income for state and local taxes, while the top 1% pay around 7% of their income for state and local taxes. That's fundamentally unfair and would only get worse if taxes were raised on everyone.
Illinois cannot afford to cut any more funding for vital programs and services. The recent budget impasse reminded all of us what state government supports -- or should support. We have the opportunity now to help communities thrive through a government that is funded long term.
It's clear that the fair tax is what we need for our state, and I hope my fellow Illinoisans will agree when they head to the ballot box in November 2020 to vote "yes" on the constitutional amendment that will allow Illinois to have a fair tax.
John Bouman is the president of the Shriver Center on Poverty Law and chair of the Responsible Budget Coalition.