Fiscal And Revenue Reform
continued

•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••
Further, Illinois has already cut billions in funding for essential human services over the past decade.  Between 1995 and 2006, Illinois cut spending on all public services other than education, health care and pensions by over $1.1 billion; and between 2001 and 2004, spending on human services decreased by 10% or $387 million.  Unless comprehensive fiscal reform is passed to make Illinois solvent and provide a stable sources of recurring revenue to cover the human services cost increases caused by inflation, all human services funding will suffer deeper and deeper cuts.

More spending cuts do not make economic sense:  they would only hurt the economy and cause further job loss.  Cutting spending worsens the recession by costing the state tens or potentially hundreds of thousands of jobs and setting the economy back further at the very time when demand for public services is increasing.  On the contrary, maintaining or increasing state spending is the best way to fight a recession, stimulate the economy, meet the increased need for services and generate job growth.  Increasing total spending keeps people employed, buying goods and services and has a multiplier effect. 

At the end of the spring 2009 legislative session, the legislature passed a temporary budget that cut state government and cut social services, while raising limited new revenues through video casino gambling.  The real decisions were deferred to a more politically safe time.  We can do much better. 

Illinois can afford to pay for all of its priorities, if it raises new revenues through a progressive tax increase on those who can afford to bear it.  Illinois currently has one of the very lowest tax burdens in the country.  Illinois, with its flat 3% income tax rate, has the lowest flat rate of all states with a flat income tax, and Illinois has the lowest overall effective tax rate of all states with an income tax.  Overall total state and local tax burden as a percentage of income in Illinois ranks 41st in the country.  At the same time, Illinois has one of the most productive economies in the country, with the fifth largest population, the fifth largest economy nationally (measured by GDP), and the 27th largest economy in the world, greater than Egypt, Saudi Arabia, Sweden, Norway, Belgium, Columbia and Greece.

Yet Illinois also has one of the most regressive and unfair tax systems in the country.  In the Illinois, the lowest 20% of people – those whose incomes average $8,900 - pay 12.8% in state and local taxes, while the richest 1% - those making an average of $1,322,000 a year - pay just 5.8%; and the richest 1% pay just 4.6%, when the federal offset is included.  Further, Illinois is one of only six states (CO, IN, MA, MI and PA) with an income tax that has a flat rate that applies to all taxpayers.  Every other state has some progressivity built into its income tax rate structure.  Low and middle income families are hit hardest by payroll, excise, property and sales taxes. 

« back continue »