Thursday, August 26, 2010

Tax cuts don't add up

By Jamey Dunn

Gov. Pat Quinn has incorporated a new component to his proposal for the state budget: property tax relief.

Quinn’s original budget proposal included a 1-percentage-point income tax increase, which he said would go wholly to fund education. At the time, the governor was proposing a $1.3 billion cut to education as the only alternative to the tax, which he said would be necessary to replace federal stimulus funds that will not be coming this fiscal year. Quinn’s budget office estimated the tax increase would bring in $2.8 billion. Some of the money was also meant to go toward paying down the millions in overdue bills the state owes schools.

Quinn has been bringing up the point for months that cutting school funding could lead to higher property taxes. “If you don’t have the state fully supporting education the way it should, local property taxes go up. That’s a[n] iron law. That happens. If the state doesn’t pay for schools, then local property taxes end up paying for schools,” Quinn said at a Chicago news conference.

When pressed by reporters on the issue yesterday, Quinn said he would require local school districts to cut property taxes if his so-called “surcharge for education” income tax increase passed.

Today, Quinn emphasized a concept that is not new. “I think, from my viewpoint, we’ve got to reduce reliance on property taxes to fund education in Illinois. That is an imperative if we want to have a stronger economy and have better education. The state of Illinois, according to our Constitution, has the primary responsibility for funding schools.”

The idea that education should be funded predominately by state dollars and not local property taxes has long been a topic of debate. It was the thrust of the Senate Bill 750 plan, which the tax increase that passed in the Senate last year was based upon. However, that plan, which stalled in the House, includes a 2-percentage-point income tax increase and broadening sales tax to include some services.

Here is how Quinn explains his plan: “What I would envision is, the amount of money that the school districts get, additional new money from the state, a portion of that would be abated in property tax abatements — reductions — to the families and businesses and farmers of Illinois. … If you get additional new money from Springfield, from the state government, then I think part of the bargain has to be that the local school districts at least roll back a portion of their property taxes. … They end up getting more money. … They’ll get more money for education, and the taxpayers will get lower property taxes.”

But Quinn’s plan is scaled back on the revenue side. Promising more funding for education and a cut in taxes during an unprecedented budget deficit while facing a huge stack of unpaid bills may be unrealistic. Quinn’s proposed income tax increase would barely make a dent in the estimated $13 billion budget deficit.

Quinn’s Republican opponent in the governor’s race, Sen. Bill Brady, has claimed that he can balance the budget in one year, while avoiding mass teacher layoffs and property tax hikes. His plan also includes a billion dollars in tax cuts.

Kent Redfield, an emeritus professor at the University of Illinois Springfield and director of the Sunshine Project, a nonprofit campaign contribution database connected to the Illinois Campaign for Political Reform, doubts that large tax reductions will come if Brady is elected. “We’re not going to have a huge tax cut because we will have a Democratic Senate. And we can’t afford it anyway.”

Requests to Quinn’s budget office for more specifics on his proposal were met with referral back to tape of the news conference that Quinn held in Chicago earlier today, where he took questions on the plan but did not get into the numbers.

While proposals to cut taxes may play well on the campaign trails for both candidates, it appears that the money for such plans is just not there — even with an income tax increase. The state’s budget gap is just too big.

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