Nov. 01--A week ago we explained why the race for governor of Illinois isn't only about whether incumbent Pat Quinn or challenger Bruce Rauner will be Illinois' CEO for four years. This contest also is a referendum on the future of the 67 percent personal income tax increase that Democrats enacted in 2011. Will that tax hike start to roll back on Jan. 1, as the law Quinn signed four years ago provides?
Quinn and many of his fellow Democrats will tell you that if they don't make their temporary tax increase permanent, the loss of that revenue will leave Illinois, and especially its schools, savaged. As if the state would have no other way to meet its commitments and balance its budget.
The assertion that there's only one way for Illinois to survive and thrive -- We must set our tax hike in concrete! -- isn't true. Quinn, House Speaker Michael Madigan and other Democrats at various times have advocated other tax plans. Those plans have included such measures as cutting tax rates, applying the state sales tax not only to goods but to services, and reducing spending.
So when someone (or some TV commercial) tells you that without the income tax extension our schools will implode and Illinois will melt into Earth's crust, retort with these six bullet points:
--We can't reiterate too often that making this hike temporary was the idea of 90 lawmakers (all Democrats) who voted for it and the governor who signed it. Same with the assurance that enacting their increase would solve Illinois' financial problems. They then spent four years failing to manage for the start of 2015, when their tax begins to recede. Whatever their issues with the temporary tax partially rolling back, this is their plan and their schedule.
--Toni Preckwinkle relieved Todd Stroger of his Cook County Board presidency in 2010. She pledged to gradually kill the remainder of his hated sales tax increase, much as Rauner pledges to kill Quinn's tax increase. Skeptics moaned that if Preckwinkle cut the tax (she did), she would devastate county services (she didn't). Lesson: Sharp leaders can do this.
--With or without the extra income tax revenue after Jan. 1, lawmakers have to write a spending plan for the remainder of this fiscal year. That's because, as Chicago's nonpartisan Civic Federation reported this month, Illinois has ... no ... realistic ... budget: The bogus one Quinn signed underfunds agency costs by a daunting $470 million. After this election, either Gov. Quinn or Gov.-elect Rauner has to shape a whole new spending plan.
--That bogus budget has Illinois spending nearly $36 billion this fiscal year, with $8 billion of that coming from the income tax increase. The Jan. 1 partial rollback will shave second-half revenues by about $2 billion. What to do?
Recall that the taxers of 2011 have continued to raise spending. The threat of an aggressive cost-cutter being elected governor explains why so many vested interests fear one outcome in the race: As we've noted, different candidates have different ideas about what Springfield "needs" or "must have" or "can't possibly cut."
With Illinois in an emergency, its credit rating dismal and its economy moribund, we'd take hard looks at capital spending (read: politicians' pork projects) from general funds, the eligibility of Medicaid recipients, the salary structure of state government and all the multimillion-dollar line items that Springfield's apologists dismiss as too insignificant to deliver big savings. When you only have to cut $2 billion, every million helps. (Mr. Madigan, about that $35 million for a school in your district ....)
--Illinois collects $18 billion a year in income taxes and $8 billion in sales taxes. That gouges working-class and middle-class families more on how much they work than on what they consume. We would expand Rauner's proposed broadening of the sales tax to include virtually all consumer services, which account for two-thirds of Americans' consumption. Done right, broadening the sales tax base while letting Quinn's income tax surcharge die could let the sales tax rate drop.
Rauner also proposes "corporate welfare reform" of credits and loopholes, and curbs on special handouts that tip the playing field against some employers while subsidizing a chosen few. The Tribune reported in June that plans to close loopholes have been knocking around the Capitol for years -- some previously proposed by Quinn. Nothing's happened.
--Year after year, Illinois spends more than it can afford.
Whatever the election outcome, the Civic Federation's Laurence Msall hopes Illinois follows this new path to spend no more than it will collect: First, honestly project revenues. Then prioritize how much to spend on the big drivers -- debt and pension payments, Medicaid and education. To finance the rest, eliminate deductions and loopholes. Then and only then, change tax rates.
Come Tuesday, voters will choose what to do about the income tax increase that has pushed job creation into other states. Just remember, Illinois can change how it taxes and still meet its goals.
