Taxes in Illinois aren’t high enough. At least for the wealthiest Illinoisans. That’s the message from Ralph Martire, Executive Director of the Center for Tax and Budget Accountability.
The problem, he says, is that our tax structure isn’t “fair”, and hasn’t been for decades. We keep hearing that Illinois is “broke”, but our real problem is that we aren’t raising revenues the way most other states are. He offers so many provocative and thought-provoking ideas about how to get Illinois moving that we really want to encourage you to watch this show. Martire’s thoughts are worth considering before the simplified, bumper-sticker slogans glut every minute of our TV watching. To make it easier, we’ve also included time posts for key points, so you can jump in anywhere.
“The bottom line is: every year, our tax revenue growth, after you adjust for inflation and changes in population, isn’t enough to maintain the same level of services we provided the prior year,” he begins.
And he recruits to his side the “father of capitalism,” Adam Smith: “‘For taxes to be fair in a capitalist economy, you need your taxes to remedy inequality of riches as much as possible by relieving the poor and burdening the rich.’ That’s an exact quote. So I guess he was the first Class Warrior.”
Martire divides modern history into two distinct periods: WW2 to 1979 and 1979 to present. In 1980, with the election of Ronald Reagan, America’s tax structure was radically revised in an effort to stimulate a sluggish economy. (4:55)
“From 1979 through 2011 the wealthiest ten percent in America got 139.8% of all income growth. For the math challenged, all of it is a hundred percent. That would be all. So for more than all of it to go to the top ten percent, that means the bottom 90 percent have to, on average, be earning less today than they did in 1979 after you adjust for inflation. And that’s the truth. Almost 40% less.”
Illinois, as you’ve probably heard, is the most-heavily taxed state in the union. “Yeah, that’s absolutely wrong, and it flies in the face of all the data,” he tells us.
“Illinois has ranked in the bottom six or seven states in the nation in total tax burden as a percentage of income for decades,” he points out.
There was, as we all know, a tax increase in recent years, but it doesn’t seem to have had much effect.
“Even with that tax increase we went up from 46th in total state and local tax burden to I think 37th. We’re still in the bottom 13.” And that’s had a long-term dragging effect on our economy, he asserts. “Illinois’ economic growth has lagged the much-higher-taxed remainder of the midwest, and the much higher-taxed rest of the nation. For decades.”
So do higher taxes mean fewer jobs? “If you look at all the peer-reviewed analyses out there, that look at the correlations between a state’s tax policies and its economic growth, you know what they find? There’s none.” (12:30)
Ralph Martire on taxes and education funding: “Getting back to what states can do to make a difference in growing their economy over time, there’s really only two things that show a strong correlation…investments in education, K-12, and investments in infrastructure. And states that do a really good job with that, irrespective of their tax policy, tend to grow at rates faster than other states.” (14:30)
“Because the State does such a poor job of funding education from state-based resources, Illinois is the most reliant state in the country on property taxes to fund schools…so what that does, is it ties the quality of public education a child receives in Illinois to the property wealth of the community in which the child lives.” (25:00)
And finally, what about the pension crisis? Did it have to happen?
“By law, in 1995 they passed a pension ramp bill if you remember. They grew the State’s unfunded liability from 17 billion dollars in 1995 to $46 billion in 2008. That was the law. That was the design of the law…And then we all know what happened in 2008, we were in the middle of the great recession, a bunch of assets the state did purchase lost their value just like everybody else’s assets lost their value, and overnight we pretty much went from $46 billion underfunded to 92 billion. It has nothing to do with the benefit levels payable to public sector workers like teachers…in fact the weighted average benefit across all five public employee systems in Illinois is about $32,000.” (18:00)
And a final note. Shortly after we taped this program, Mike Madigan announced his support for a Constitutional amendment that would raise taxes on those earning more than a million dollars annually. That’s different from Martire’s argument, which is that the tax structure should be graduated rather than flat.