FAIR TAX 'IS NOT COMMUNISM, IT'S MATH;' IT BRINGS REVENUE TO FIX STATE'S WOES by Suzanne Hanney
Following a Zoom meeting on the November referendum for a progressive tax led by Chicago tax expert Ralph Martire, a LaGrange woman developed this elevator speech for friends: “In the past few months, we’ve seen a lot of inequities revealed in our society, and the flat tax leads to inequities because it puts the burden on low- and middle-income families.” Illinois currently has a flat tax of 4.95 percent, but the referendum would amend the Illinois Constitution to replace it with a graduated tax according to income, just like federal income tax. Under the proposal: • people making $100,001-$250,000 annually would continue paying 4.95 percent • those making $10,001-$100,000 would drop to 4.9 percent • people earning less than $10,000 would pay just 4.75 percent.
"YOU CANNOT TAX LOW-INCOME PEOPLE TO FUND SERVICES IN POOR COMMUNITIES. THEY DON’T HAVE THE MONEY."
Only 3 percent of Illinoisans would see a tax increase. The rate would go up to 7.75 percent only when someone reaches income of $250,001, and it would hit a top rate of 7.99 at $750,001. It is also projected to bring $3 billion new revenue for the Illinois budget.
-RALPH MARTIRE
But another participant in the Zoom meeting sponsored by the League of Women Voters/Unitarian Universality Advocacy Network of Illinois (UUAMI) asked, “Why does Illinois tax anyone who makes less than $10,000 a year?”
Illinois (but only 44 percent nationally). Overreliance on local property taxes for education funding creates inequities between school districts across the state: between Harvey and New Trier, for example.
“Because the state is too broke,” to eliminate taxes on them, answered Martire. He is executive director of the Center for Tax and Budget Accountability and Arthur Rubloff professor of public policy and public administration at Roosevelt University.
With the flat tax, everyone pays the same rate of 4.95 percent. But the flat tax is regressive because it is harder for a low-income person to pay than a millionaire. The progressive income tax, on the other hand, offsets all other state and local taxes, which are also harder on low-income people.
Putting politics aside, the argument about the progressive tax – also known as the “fair tax” – comes down to “revenue” and “regressiveness.”
Public officials are left with two unpopular alternatives: raise taxes or cut these services. They opted instead to hide the problem, Martire said, by deferring money from pension funding to pay the other bills, which has led to the current budget deficit. They also deferred the state’s obligation to fund K-12 education to local property taxes, which is why these taxes are so high. Across the U.S., states pay an average of 47 percent toward education, but Illinois pays just 24 percent of this cost. Local property taxes account for 67 percent of education funding in
“For somebody who’s making less than $10,000, you might be talking about the difference between paying your electric bill or all your rent, or medicine for your child,” said Tracy, a formerly homeless, grassroots organizer with CCH, regarding the flat tax. “For someone making $250,000 a year, they’re talking about luxury wants, but I am talking about being able to provide food, shelter, clothing. In an ideal world I would want everyone to have the basic necessities and beyond that it’s the icing on the cake. But we all need the cake. For me it would cut into my needs, not my wants, it’s not fair. For someone making minimum wage, it’s still not affordable. We need as much of our paycheck as possible.”
COVERSTORY
The flat tax was a political compromise to appease conservative Downstaters who didn’t want an income tax at all. Since its inception during the Illinois Constitutional Convention of 1970, the flat tax has never raised enough revenue to eliminate the state’s structural deficit, Martire said. Illinois spends more than it takes in.
For example, Illinoisans making less than $21,800 a year pay 14.4 percent of their incomes in combined state and local taxes, while those with annual income of $537,400+ pay only 7.4 percent of their income, said Brandon Marks, Fair Tax state organizer with Chicago Coalition for the Homeless (CCH), quoting the Institute on Taxation and Economic Policy.
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