Why we should support the Fair Tax Amendment
The confusion and distortions being circulated about the Fair Tax Amendment need to be cleared up. Under the current Illinois Constitution, all state income taxes must be levied at the same rate for everyone.
Since the legislature has power to raise taxes now, the amendment does not make it easier or give them any right they don't have. What it does do, however, is if Springfield chooses to either raise income taxes or create some other tax, it would allow them to do it in a more fair manner so people who could be impacted the most adversely at lower income levels would not be hurt. Legislators could shield people below certain income levels from an increase or a new tax, which they cannot do now.
The same percent of tax for someone with a lower income is much more of a hardship than it is on someone with higher income. Under the current system, taxes on lower income earners consume about twice as much of their disposable income as it does for the top 1% of incomes.
To their credit, the legislature has told voters what will happen if amendment passes: If you make under $250,000, you will have no increase; some will have a decrease in taxes.
If the amendment does not pass -- especially in light of COVID-19 and state budget constraints -- there will be a need for some new revenue. That means there will be a need for a tax increase, and such an increase will have to be at the same rate for all. That means an increase in taxes for everyone. That can only hurt our economy more since those at lower incomes and in the middle class will have less disposable income to spend, and these are the people who shop and buy stuff that keeps businesses going. The upper income levels are not likely to change their spending habits. They will merely have somewhat less to invest.
With regard to speculation that this amendment would give too much power to Springfield and they would just continue to raise taxes: They have the power now. Looking forward, another point to note is that the legislators in Springfield -- whether they are good or bad guys -- are all politicians who know people don't want, or like, higher or new taxes. Consequently, they are reluctant as a rule to support something that might affect their ability to get reelected. It's just a matter of politics 101. It is never easy to pass a tax increase or impose a new tax. Realistically and pragmatically, it is not likely you are going to see tax increases more often after the amendment is passed, and even less likely you are going to see moves for any new taxes. Most other states with progressive income taxes reflect that.
However, if the amendment does not pass, there will be a tax increase on everyone due to the overwhelming need for new revenue. The legislature will more easily rationalize that: They gave the people a chance to have it done more fairly, and the people rejected it.
The myths about the Fair Tax -- propagated by ads featuring sympathetic little old ladies and paid for with money from some millionaires -- need to be debunked.
• The amendment does not give more power to Springfield. It does not change legislators' power to adjust tax rates, because they can do that now. It merely gives them power to create higher tax rates for higher earners and lower tax rates for lower earners, which they cannot do now. If amendment passes, per legislation passed that goes into effect upon passage, 97% of Illinois taxpayers would see a tax cut.
• The amendment does not hurt small businesses. It cuts taxes for small businesses making under $250,000 in profit and does the same for all taxpayers with incomes under $250,000.
• The amendment will not tax retirement income. Illinois does not tax retirement income, and there is nothing in the amendment changing that.
• Cutting state spending will not fix things. Illinois has already underfunded education, public safety and human services for many years. Underfunding education contributes to our high property taxes, and cutting can only make things worse.
• There is no evidence raising taxes on the wealthy will cause them to leave Illinois. In actuality, states that recently have raised millionaire rates have seen a growth in their millionaire populations.
• There is no evidence that raising the top marginal tax rates will hurt the Illinois economy. The existing data shows that, over a recent 10-year period, the nine states with the highest marginal tax rates outperformed the nine states with no income tax. Moreover, keeping rates lower on middle class and those with lower incomes gives them more disposable income to spend and boost our economy.
I therefore strongly urge support for the Fair tax Amendment since I believe it is the best and most fair way to deal with situation facing our state. Illinois is an outlier -- one the few states that does not have progressive tax rates like we have at the federal level. With passage of the Fair Tax Amendment, there is also a better chance that the state will be able to assume more for education in our state and therefore help the local property tax burden which is becoming more burdensome every day. In fact, the legislation that goes into effect if amendment passes also increases the tax credit for property taxes from 5% to 6%. Without this new fair approach to taxation there is slim or little chance we will see any improvement on the property tax burden.
If Springfield is compelled to seek a tax increase without the amendment, they will be restrained politically and less inclined to do as much as they could do or should do for education, and then the property tax burden has little chance of improving.
I agree we have other issues to tackle. I support getting rid of backroom gerrymandering and trying to come up with some new constitutional approach to pensions prospectively that does not impair rights of those in the system.
But the fact remains that we need revenue now, and we can either generate it fairly with the amendment or in the same unfair and unjust way that we have to do it now without the amendment. We still have to pay out on the pensions to all in the system, and no constitutional amendment can change that. The next redistricting we can impact is 10 years from now.
We need to avoid an increase in income taxes that will hit everyone in Illinois regardless of their financial ability to handle it. That makes acting now most compelling.
We can do that by passing this amendment so that 97% of Illinois will get a tax reduction. Please join me in supporting fairness in income taxation in our state, and vote yes for passage of the Fair Tax Amendment and urge your friends and neighbors to lend their support!
• Elliott Hartstein of Northbrook is the former mayor of Buffalo Grove.