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News :: Economy |
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High Taxes In Illinois? Only For The Poor |
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by Mike Lehman
(No verified email address) |
04 Feb 2003
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All in all, Illinois has a poor record on the fairness of its tax system The incoming Blagojevich Administration has pledged not to increase taxes, but the best thing it could do to fix the broken system which is the very unfair Illinois tax code is to propose a general increase in the flat rate (which we are constitutionally stuck with) income tax. This should be accompanied by a significantly increased set of income tax credits and exemptions for working families so that these changes actually result in the wealthiest 20% paying their fair share - at least as much as the poorest 20%. |
High Taxes in Illinois? Only For the Poor
A new report by the Institute on Taxation and Economic Policy on tax fairness and equity reveals Illinois is still one of the worst states in the nation when it comes to shifting the financial burdens of government to the poor. Illinois ranks as the sixth worse state in the country, with the average taxes on the poorest fifth of the state’s citizens being at a level that is 224% higher than the tax burden on the richest one percent of the state’s residents. Even for the middle 60% of Illinois’ residents, taxes are still 180% higher than the average paid by the top one percent.
Illinois is far from alone in this regard. An average of all states in the United States reveals that the poor pay more than a 5% higher part of their incomes than the top one percent, with the second poorest 20% paying 4% more than top earners, the middle quintile paying almost 3% more than the rich, and even the fourth quintile still paying an average of two and a half percent more than the truly rich. Thus, the primary finding of the survey is that “most state and local tax systems take a much greater share of income from middle- and low-income families than from the wealthy.”
On top of this news of injustice, things seem only to be getting worse, mostly because the wealthy have taken control of both the political process and the media which seems to constantly remind us that “taxes are too high.” The result has been, not an overall lessening of the tax burden, but a shift in taxes onto the backs of working families in the name of “tax reform.” At the national level, in the period 1989-2002, we see yet another group of tax breaks aimed at the wealthy (who have been the prime beneficiaries of several earlier tax cuts) by the Bush Administration, even though the average tax burden on the top 20% of families in the U.S. has fallen substantially already. In the same time, taxes on the lower 80% of all workers by quintile has risen from +0.4% on the fourth quintile to +1.2% on the lowest fifth of all workers.
At the local level, such ill-designed initiatives as increases in gas and cigarette taxes, plus tax caps, have not only crippled local schools’ abilities to deliver quality education in the face of massive budget deficits, but has also resulted in an even greater increase in the tax burden on ordinary working families than at the national level. In Illinois, the poorest 20% have seen their already unfair share of taxes go up by 1.6% since 1989. For the entire lower 80% of taxpayers in Illinois, taxes have gone up by at least 0.6%, with the increase being larger the lower the taxpayer’s income.
Among the regressive features in Illinois’ overall tax structure:
* Groceries are subject to sales tax (although at a lower rate than other items, food is often exempt from sales tax in other states, since such a large portion of the family budget goes to food at the lower end of the scale – and the fact that the rich can only eat so much.)
* The flat-rate state income tax, that sounds good in theory, but which needs a drastic reform (read “increase”) of earned income credits for working families in order to be fairer in the absence of a constitutional amendment that would allow a more equitable progressive income tax.
* The fact that the exemptions on the state income tax are very low, meaning that the less than wealthy find little of the shelter for their incomes that other exemptions provide for the rich.
* A property tax credit that is non-refundable, i.e. if you don’t have enough qualifying income to deduct it from, you can’t claim the property tax credit, since it is only deducted from taxes owed, rather than functioning as a way to alleviate the tax burden on the poor.
In addition, Illinois’ already limited low-income credit is further limited in that it is only temporary. Will the new administration in Springfield make the low-income credit permanent (or even increase it, as would be just)? Or will the already existing credit fall victim to the state’s budget crisis, which has already impacted disproportionately on the less-advantaged citizens of Illinois? Antics such as this keep Illinois in the ten most unfair states when it comes to taxes, as they all share this common feature of their tax systems.
Illinois does give some tax relief on property taxes to its seniors, but to be really fair this needs to be extended to at least the poorest 20% of Illinoisans (who don’t currently qualify, unless they are elderly.)
Recent tax increases in Illinois have focused primarily on “sin taxes” on such items as cigarettes, but the revenue increases that legislators had hoped for have fallen victim to decreased consumption (if you’re poor, giving up cigarettes because of high taxes is about the only help you can expect from the government.) The same can be said about any increase in gasoline and other fuel taxes, which have minimal impact on the habits of the rich, but which impact working families hardest, leading to further consumption drops which greatly reduce any revenue gains anticipated from these tax increases.
All in all, Illinois has a poor record on the fairness of its tax system The incoming Blagojevich Administration has pledged not to increase taxes, but the best thing it could do to fix the broken system which is the very unfair Illinois tax code is to propose a general increase in the flat rate (which we are constitutionally stuck with) income tax. This should be accompanied by a significantly increased set of income tax credits and exemptions for working families so that these changes actually result in the wealthiest 20% paying their fair share – at least as much as the poorest 20%. Other changes may be necessary, but justice demands that the system be fixed, not massaged for the political benefit of the new governor.
For the full report from the Institute on Taxation and Economic Policy, “Who Pays: A Distributional Analysis of the Tax Systems in All 50 States” go to:
http://www.itepnet.org/wp2000/text.pdf
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