Saturday, March 24, 2007

Tax proposals -- the more progressive, the better

Half of public policy is spending. The other half is taxing.

Progressives tend to spend most of our time on the spending side defining what we want to buy -- doctors, teachers and bus drivers with operating dollars and hospitals, schools and buses with capital dollars.

Right-wingers tend to spend most of their time on the taxing side defining that they don't want their sponsors (high income people or corporations) to be taxed at all.

So, right-wingers tend to get their way. Government taxes on wealth and high incomes continue to fall. (Taxes on work and low-incomes, unfortunately, aren't attacked by right-wingers, so they tend to rise). And we progressives often don't get to buy the things that would be good for the nation because....there isn't any money.

The best group in the country working on arming progressives with analysis to advocate for taxes on high incomes is the Center for Tax Justice. They helped start a blog called Talking Taxes here and their website is here. If you're not a member, join up.

Anyway, in Illinois, we're lucky. We're in the midst of a glorious debate over tax fairness and Governor Blagojevich deserves a ton of credit for launching it. He's got a bold proposal to fund health insurance and education boosts through a gross receipts tax and a business payroll tax. The rhetorical center of his campaign is that business isn't paying enough. And they're almost certainly not -- especially the biggest ones with the most money. We have the lowest state income tax in the nation (3% for individuals, 4.8% for corporations), and people or companies with high profits or income can figure out how to shelter a lot of their income so they don't pay even that small levy. The rest of us, meanwhile, pony up with very high sales taxes and relatively high property taxes. That means taxes our regressive -- we hit low and moderate income hard and go light on high incomes. Not smart, especially since our middle class is getting flattened by other government policies: corporate trade agreements that export jobs, anti-union labor laws, tolerance of millions of undocumented workers without an amnesty and underinvestment in education so that education gets both more expensive and of lower quality.

So the great progressive debate happening this month is, in shorthand, 750 versus GRT. HB 750, championed by Senator James Meeks and cooked up primarily by the Center for Tax and Budget Accountability, is a straight-forward progressive reform that taxes high incomes more and low incomes less. (By the way, props go out to blogging Representative John Fritchey for representing a higher-income district but publicly recognizing that it's good for the entire state to get away from our poverty-perpetuating regressive tax system and championing HB 750. 750 got out of a Senate committee last year (after adding in some higher education money), and got a House committee hearing last week.

The Gross Receipts Tax is part of the Governor's submitted budget and has raised the ire of just about every business group in the state. (Opposition from the business community often, but not always, signals that the bill is good for most people of the state). However, most legislators aren't biting. As one legislator told me this week: "they're pushing the Kool-Aid hard. But I'm not sipping." The GRT is essentially a sales tax, and that hits lower incomes harder than higher incomes. That's regressive.

The Governor would like to buy some progressive things with the money -- just-about universal health insurance. That's good. But is that enough for Democrats to overcome the regressive aspects of the GRT? Based on the reaction so far, it doesn't look like it.

But again, the Governor has moved the debate in a great direction launching a campaign for tax fairness and an agressive call for change against the champions of the status quo. That alone earns him credit in my book. Now the General Assembly might find a better way of matching his soaring rhetoric.


respectful said...

G-Rod's premise may be wrong: Business pays nearly half of all state and local taxes in Illinois, according to a study reported in Crain's. The largest tax paid by business is the property tax. In addition, Illinois businesses pay a large share of all taxes than does business in any adjacent state.

The IFT and IEA both support the GRT.

Steve Bartin said...

Let me quote you:"We have the lowest state income tax in the nation (3% for individuals, 4.8% for corporations), and people or companies with high profits or income can figure out how to shelter a lot of their income so they don't pay even that small levy." Dan,Nevada and Texas don't have a state income tax.So,they have lower taxes.Anyway,Nevada and Texas have bridges and roads.They are two of the fastest growing states.You can't say that about Illinois.

Natasha said...

Well, I'm not sure what point Steve is trying to make. If you look at Nevada, they have an impressive state income from the gambling industry. And if you consider gambling a "poor people's tax" then there lies the same beast. Anyway, I believe there are 8 states that do not tax personal income. But what strikes me is that 19 of the 42 that do tax income have no strong tax credit system to ensure that low income families arent being hit with a huge burden.

Also, in terms of property taxes... I believe a majority of the high revenue businesses with optimal property - re: downtown chicago are in tax increment financing zones, so all that money just goes into Daley's backpocket, so to speak. I would be more concerned with regulating TIFs and increasing the transparency of these interactions, along with raising citizen invovlement in the process, to assure that property taxes are being spent judiciously.

Illinois has the 5th largest economy in the country. I believe it ranks above Belgium in terms of revenues. I believe we can afford to be seriously progressive with our taxes. Being a competitive state in a global economic system should mean ensuring citizens are healthy and educated, not stuck in a cycle of poverty and failure.