Wally Haas: Illinois’ tax system does not work

Wally Haas

Just as it’s done a terrible job with just about everything, Illinois ranks 49th in the portion of education financed by state money, according to statistics compiled by the National Center for Education Statistics.

The state covers 29.6 percent of total education costs. The national average is 46.5 percent.

“Our overreliance on property taxes in Illinois is outrageous and substantial,” said Ralph Martire, executive director of the Center for Tax and Budget Accountability during a recent visit to the Rockford Register Star News Tower. “The growth in property tax revenue, and this is after adjusting for inflation, since 1990 is more than 40 percent whereas the growth in median income is 2 percent.

“Well, this makes it pretty clear why it's so hard for most folks to keep up with this property tax liability. Their incomes just aren’t growing in line with this.”

Martire is the leading advocate for House Bill 750 and Senate Bill 2288, the tax swap bill. It would cut your property taxes 20 percent, but raise your income taxes and make you pay sales tax on services such as hair cuts and lawn-care.

Martire admits it’s not exactly a swap; it is a tax increase. But, by using statistics anyone can gather from the Federal Tax Administration, he determined that Illinois has the fifth largest economy and the fifth largest population in the nation but ranks 45th in total tax burden as a percentage of income.

“State revenue just doesn’t work under the current mix,” he said. “It’s a tax system that’s both unfair in assessing too much burden at the bottom and the middle and not enough at the top and it’s a tax burden that’s not modern. It completely misses the modern economy, creating a deficit every year because our revenues don’t grow with inflation when you can bet the cost of services do.”

Martire says the net tax increase under the proposed legislation would be $6 billion, or 1 percent of Illinois’ economy.

“What’s amazing to me about that, this is a wonky point, but it’s a meaningful point. That’s not a measurable tax increase,” Martire said. “There’s no peer reviewed model that can tell you whether or not this tax increase could possibly even hurt your economy. It’s too small. For a tax increase to be measurable it has to take 5 percent of the economic activity in the area.

“We need the opinion makers and opinion influencers to beat legislators up and the public up with the simple conclusion: Illinois has a tax system that simply doesn’t work and it has made us uncompetitive in a global economy. And we can fix it in a way that absolutely grows our economy. It doesn’t hurt us while providing a quality education for our kids.”

Martire said the data supports his conclusion. Others disagree. We’ll hear from them later.

Wally Haas can be reached