FLAT TAX CREATED 'SCARCITY MENTALITY;' FAIR TAX WOULD FUND HUMAN SERVICES

by Suzanne Hanney

It’s a been a 50-year struggle to get a progressive income tax amendment on the Illinois ballot, and if it doesn’t pass November 3, the state will have to find other means of generating revenue to balance its budget, says John Bouman, recently retired president and CEO of the Shriver Center on Poverty Law and now chairman of Vote Yes for Fair Tax.

Illinoisans currently pay a flat tax of 4.95 percent. But the flat tax is unfair, or “regressive,” Bouman said during a webinar for Illinois Partners for Human Service, because a family making $30,000 pays the same rate as one making $3 million. The flat tax is a much bigger share of the low-income family’s income. What’s more, the current system relies more on lower- and middle-income people than on those at the top; in the process, the state’s greatest way of generating revenue is failing the whole system.

Only 3 percent of Illinoisans – those with incomes above $250,000 -- would pay more than the current 4.95 percent under the progressive income tax proposal on the November ballot, Bouman said. Also, the topmost rate of 7.99 “compares favorably with Wisconsin and Iowa and is well below Minnesota” (see ropposite page). Meanwhile, everyone making less than $100,000, or 85 percent of the population – would pay less than 4.95 percent.

“This is not some radical thing. It brings Illinois into the mainstream and takes it out of the laughingstock of late night TV, of being such a sick state,” Bouman said. “It’s not true we’re trying to dump on everyone who’s got money, we’re just trying to bring lllinois into the mainstream and make this thing more fair.”

The progressive/fair tax proposal doesn’t give the Illinois General Assembly any new power other than to calibrate the new tax. When opponents say it will allow the state to tax retirement income, “they tell a lie,” Bouman said. “No, it won’t.”

But the measure will address the 5 percent budget cuts proposed for this year and 10 percent for next year in a way that doesn’t further burden lower- and working-class people, he said.

“We have all been operating in time of scarcity so long that it’s hard to visualize a system that works,” said Sam Tuttle, former director of policy at Heartland Alliance and current committee director, Vote Yes for Fair Tax, during the Illinois Partners webinar.

The $3.2 billion expected to be raised from a progressive tax “would give all of us brain space to be creative, to do all the things we want to do that the stress has taken away from us.”

Human services encompass everything from childcare to elder care, substance abuse and mental health treatment, disability services, workforce development and more. The sector has been systematically underfunded and is now down to 16 percent of the Illinois general revenue fund from 26 percent in 1997, said Lauren Wright, executive director of Illinois Partners for Human Service. But in a global pandemic that has demonstrated an exaggerated effect on low-income and minority people, you can’t have a robust response without human services, Wright said.

“You can’t have someone shelter in place if they don’t have a home and you can’t tell someone to stay at home if they don’t have access to food or income. That is the gap that human services fill. When we think about the fair tax, we’re thinking about a small step in the right direction in rectifying this 20-year decline in human services.” Wright said.

Where is the scarcity now and what would a better-funded future look like?

“We are absolutely scrounging every year for money,” said Katie Spoden, advocacy and development coordinator at the Alliance to End Homelessness in Suburban Cook County. Although the Alliance itself is not a direct services provider, but rather the coordinator of 40 groups applying for $13 million in federal funding to end homelessness in the suburbs, “One thing that is always apparent is the scarcity of resources and having to use the reimbursement model, because no money is provided upfront and reimbursement is not timely, which stalls the services that can be provided to people experiencing homelessness and people at risk of homelessness.”

From a client’s perspective, said Tracy, a grass roots organizer at Chicago Coalition for the Homeless (CCH) who was in a shelter for a year after the death of her husband and who has been intermittently homeless, “They want to bring stability to people in an unstable situation but don’t have anything to give them that’s stable. I felt like a hamster on a wheel, running and running and getting nowhere.” Tracy’s daughter was 2½ when her father died, so childcare was like the piece someone pulled out of Tracy’s Jenga puzzle that brought it tumbling down, she said.

Although Tracy worked in management, her hours extended until 1 a.m. and it was difficult to find a childcare provider who would accept her daughter, since most providers need to be awake for 5 a.m. drop-offs. “It’s a matter of timing. If you come to a program at the right time and they have something available, fine. If not, you’re spinning your wheels. That’s where my white privilege kicked in. I got a scholarship.” She is now earning a master’s degree. “But

almost everyone I’ve known in a shelter situation, it’s the same. It’s not enough to get you where you need to go.”

“From the nonprofit provider’s perspective, because nonprofits are on shaky ground with scarce resources, we need to have that stability to provide others with stability,” Spoden said.

Association of Individual Development (AID) photo

The state’s reimbursement model also prevents the service providers from building new infrastructure, Spoden said. In the past, suburban Cook County providers used rotating, volunteer-run shelters that were faith-based. “We knew that was fragile before and not good with COVID going forward. At this point we have the new CARES Act dollars available to us so we can invest in 24/7 shelters that can serve specific populations like families, young people 18 to 24, the medically vulnerable. But with how little the state has been investing in emergency shelter and transition funding, we will not have the revenue to sustain us going forward.”

On the other hand, the $3 billion from the progressive tax would give nonprofits some new money and the flexibility to advocate for housing, she said.

There are four specific items that concern housing (permanent supportive housing, homeless prevention assistance, homeless youth programming and emergency shelter/transitional housing), and each year the Alliance asks for increases, Spoden said, “although there has never been enough to meet the need.” Legislators are receptive to them, but consent decrees and other obligations have first hold on the state’s money, so allocations fluctuate. Homeless prevention assistance, or funds that help households navigate a short-term crisis to avoid homelessness, was funded at a high of $11 million in 2006 and then cut to $4 million during the 2008 recession; it’s now at $9 million, said Brandon Marks, Fair Tax state organizer at CCH.

“As a person who has spent more than 20 years working for nonprofits and government, it’s been very clear the state budget only has certain places where we have discretionary spending – where we can make cuts,” said Lore Baker, president and CEO of the Association for Individual Development (AID), which provides services for people with intellectual and developmental disabilities and people with behavioral health needs like depression, anxiety, bipolar schizophrenia. “Every time there is a huge tragedy, people talk about mental health services, affordable housing for people with intellectual and developmental disabilities being able to live in their own communities with supports, but we never have any money to invest in those kinds of visions.”

AID has 41 community integrated living arrangements (CILAs) in northwestern Cook and six collar counties for 185 people and it supports 800+ people with behavioral health needs. Their alternatives would be either institutionalization or cycling in and out of homelessness and jails, Baker said.

“Every year the budget is really desperate,” Baker said. “This past year was probably the best; in the first quarter of the budget year we do not know as service providers what we will be paid because 5 percent cuts are called for. Next year it’s 10 percent. This is on top of increased calls for service due to increased anxiety, and depressed suicidal thoughts across the service system. There’s lots more calls and need for service to people who never sought services before because of the world in which we find ourselves: COVID, racial injustice, fires, hurricane.”

Illinois institutionalizes people at a higher rate than many other states, Baker said. But because the U.S. Supreme Court held in Olmstead v L.C. that institutionalization violates their civil rights to live in the least restrictive environment, Illinois is bound by three class action lawsuits -for people with physical disabilities, developmental disabilities and mental illness -- and the resulting consent decrees to which Spoden referred. Illinois still had 1,659 people in seven state-operated centers as of FY17, down from 2,762 in FY05. Eighty percent of Illinois clients receiving services are in CILAs of eight people or more, whereas most states are moving people to apartments with two, three or four people, she said.

“Lack of funding has created a dual system,” Baker said. “If you are a class member, you receive a different kind of service. Class

action lawsuits are supposed to change the system for the better. But because we’ve had to funnel money out of an already poor system to answer these consent decrees for those class members, it has further weakened the ongoing mental health system. You just continue serving people in a way that is not upholding their rights. If you had more resources you would be able to improve the entire mental health system for children, families, veterans, long-term chronically homeless. We would be much better able to support people with mental health needs.”

Consent decree notwithstanding, in terms of intellectual and developmental disabilities, as of September 8 there were 18,765 people on the waiting list for Medicaid-waiver services: things like community day services, employment services, assistance with cooking, cleaning, personal hygiene, transportation or anything that would support their small-group living in the community. The waiting list grows every year as students in special education turn 22, are no longer eligible for education, and “end back at home in the basement playing video games because there is no service,” Baker said. Thousands of people with intellectual and developmental disabilities in Illinois live with caregivers who are 75 or older.

If they still have not been taken off the list when their caregivers die, “they wind up in a state-operated developmental center as an emergency placement that their family spent their whole life trying to keep them out of.”

The Illinois model for disability services has people on waiting lists for housing, substance abuse and mental health treatment, whereas immediate availability of services would allow them to change their lives as soon as they are ready. “If you don’t have these services, you have people running through the jail system, going to the emergency room,” Baker said. “If you don’t have housing, it’s hard to manage your physical health problems. It’s just a big vicious circle. All these things cost taxpayers way more money than this little income tax, this fair way of raising resources for the state of Illinois to provide support services.”