Guest post. 35 Springfield politicians oppose fair taxation.

Guest post by MiC.

In Glen’s post today I read about thirty-five Springfield politicians opposing even the idea of putting an Illinois graduated income tax to a vote of Illinois residents. Writing legislation to oppose something that hasn’t even be put before Illinois’ voters? That seemed odd. So I read the text of the bill. Follow me through this laughable legislation:

WHEREAS, Illinois’ income tax has been levied at a non-graduated rate since its inception in 1969; and

That’s right. We should all do things the same way we did them in 1969. I like orange shag carpet, black and white TV and transistor radios. Why change? But wait, it gets better.

WHEREAS, The current flat rate structure is a commitment from the Constitution of the State of Illinois; and

I wonder why that doesn’t seem to matter where pension legislation is concerned for the sponsors of this bill?

WHEREAS, Illinois’ current flat tax rate provides a more predictable, sustainable, and enticing climate for businesses and individuals alike; and

OK, now we get into the “this has been disproven by countless studies” territory.

For example:

The major study on the relationship between state personal income tax policy and entrepreneurship was commissioned by the U.S. Small Business Administration and published in final form in early 2012.

[…]

In summarizing their findings, the economists stated: “We find no evidence of an economically significant effect of state tax [policy] portfolios on entrepreneurial activity. . .”

Or this example:

A September 2012 study by scholars at the Ewing Marion Kauffman Foundation — the leading think tank conducting research on entrepreneurship — found that the number of Inc. [magazine] 500 firms based in the state per one million state residents did not have a statistically significant correlation with the state’s ranking in the Tax Foundation’s “State Business Tax Climate Index,” which includes a number of measures of state personal income tax levels and progressivity (along with other business tax liability measures, such as state corporate income tax rates).

Liberal examples? How about this one:

A 2006 study published in the journal of the libertarian Cato Institute reached the same conclusion as the Bruce/Deskins paper. It did not find a statistically significant correlation between top personal income tax rates (state and federal combined) and the share of state residents employed in their own businesses (sole proprietorships and partnerships).

So, sorry, a graduated income tax does not discourage a predictable, sustainable, and enticing climate for businesses and individuals alike.

This next part is really choice:

WHEREAS, A graduated income tax is unresponsive to a modern economy, contributing to slower economic growth, less entrepreneurship, and fewer new jobs; and

Illinois is one of – count ’em – six states with a flat income tax rate. Modern economy anyone? The overwhelming majority of states have graduated income tax rates that increase the tax rate with ability to pay. According to the logic of this legislation, states with a graduated income tax, especially the highest one in the country, must really see their economy in the tank. The state with highest marginal graduated income tax rate is California at 13.3%. So let’s check with the Bureau of Labor Statistics and see how Cali is doing:

California Rankings Nationally:
Unemployment change month/month: 2nd
Unemployment change year/year: 1st
Job creation month/month: 1st
Job creation year/year: 2nd

Now California has got its problems, but it’s graduated income tax sure isn’t slowing its economy or job growth that added at least five-times the jobs of any of the flat-tax states over the past year.

But that’s on the west coast. What about right here at home. How do Illinois’ neighbors compare when it comes to unemployment and tax policy? Again from BLS:

Flat income tax states:
Illinois: 9.5%
Michigan: 8.8%
Indiana: 8.7%

Graduated income tax states:
Iowa: 5%
Missouri: 6.7%
Wisconsin: 7.2%
Kentucky: 7.9%

So the idea that a graduated income tax slows the economy and hurts jobs is not based in the facts or reality.

The next several paragraphs of the bill are of the same note, and based more in ideology than in reality, so I’ll skip ahead:

WHEREAS, Taxpayers would have no certainty what the final tax rates would be in the event that a constitutional amendment permitting a graduated income tax goes before voters; therefore, be it

That’s right, if a graduated tax amendment was placed before voters there’s no telling what the rates might be. Kind of like the current flat-tax rate that’s never been changed. Except when it was. I wonder what might happen if we allowed the voters the chance to weigh in on tax policy here in Illinois and adopted a graduated income tax? From the Center for Tax and Budget Accountability (PDF):

(i) cut overall state income tax burden for 94 percent of all taxpayers — that means on average, taxpayers with under $150,000 in annual base income would receive a tax cut;

The sponsors of this legislation would not want the voters of Illinois exposed to a potential amendment to the Illinois constitution that might give 94% of them a tax cut?

The bill’s chief sponsor is Representative David McSweeney, a Republican from the 52nd district. Why would he want to deny Illinois voters the opportunity to vote on a constitutional amendment that has the potential to lower state income tax rates for 94% of them? Rep. McSweeney’s bio:

Biography: Formerly a financial consultant and investment banker, David is an investment specialist and legislator. He was born October 1, 1965; a graduate of Barrington High School. David is a graduate of Duke University and earned a Master of Business Administration degree from the Duke Fuqua School of Business. Former Palatine Township Trustee and Republican nominee for U.S. Congress. Resides in Barrington Hills with his wife, Margaret and he has two daughters.

Why would a Republican with an investment banking background living in Barrington Hills go out of his way like this to oppose putting the question a graduated income tax amendment before Illinois voters?

They might vote for it.

2 Replies to “Guest post. 35 Springfield politicians oppose fair taxation.”

  1. Right–let’s continue with the flat tax (because, I think, these 35 Illinois politicians & their wealthy cronies still think the WORLD is flat) AND diminish retirees’ benefits AND turn the TRS into a D.B.P. so the rich investment guys can amass even more wealth.
    Now THAT will create a flourishing economy in Illinois, won’t it?
    And Rick Scott comes to pick at the bones…

  2. Except for one side objection (Cato is not “liberal” but rather “libertarian” – entirely different species, incapable of mating), this is a great post. Bookmarked for future reference. Thanks!

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