Appetite for state and local tax increases due to outmoded taxes
Why is it that the State, the transit agencies, the City of Chicago and the County of Cook are all looking for tax increases?
According to the Tribune story Behind the Great Tax Push, it's because they can get away with it. Typical anti-government line: they must not represent the people (who only want lower taxes) because they just got elected, so therefore, 'they' will try to shove an unwarranted tax increase down 'our' throats because they can't manage a government.
The real reason why our state and local governments are broke is because we're taxing the wrong things. We have a great tax for the 1950s economy, but in 2007, our taxes need to be modernized.
We use the sales tax to fund a big chunk of state and local government. In Illinois, we only tax goods, not services. That means if you buy a bowling ball you pay a sales tax but if you go bowling you don't. More and more of our economy is about selling services instead of goods, so the relatively few people still selling or buying goods end up with the bill while the increasing group of people selling or buying services gets a free ride.
The sales tax rate on goods has to keep rising to try to generate the same amount of money, since less and less economic activity flows through the sale of goods and we don't tax services.
There are 168 possible services that states tax. We tax 17 of them. Iowa taxes 94. Every other state in the Midwest taxes more services than we do. The Federation of Tax Administrators in DC put out that data recently, and you can check it out yourself here.
You'd think the Trib would have included some of our local experts, like the Center for Tax and Budget Accountability (that put out a great report on Cook County's structural deficit, due partially to a sales tax that only covers goods), but I guess there wasn't room with the anti-government quotes like:
Well, gee! I guess our 1950s tax system doesn't have anything to do with revenues shrinking every year. It's all about those Big Government Democrats instead who don't believe in management!
"There seems to be a general attitude to tax everything that you can," said Msall of the Civic Federation, a non-partisan government watchdog. "That's what these government officials think their role is, to oversee the expansion of government rather than the management of government."
I hope the Trib and the rest of the media tell a more accurate story about our governments and our 1950s-era tax systems in the coming weeks to explain why more of our governments are not balancing their budgets.
And more importantly, I hope we can modernize our tax system with a sales tax on services as well as goods and a progressive income tax instead of a flat tax.
[Cross-posted at djwinfo -- comments welcome over there. I finally learned how Representative John Fritchey can turn off comments on Illinoize!]
