No Word from Jack Franks Yet

by Cal Skinner

It's after Labor Day.

That's when McHenry County State Rep. Jack Franks said he was going to decide what he was going to run for.

Will it be governor?

Since Franks is against an income tax hike and Governor Pat Quinn and State Comptroller Dan Hynes are both on record as being in favor of an income tax hike, there is certainly an opportunity there.

A Democrat against an income tax hike?

When I was running against Rod Blagojevich in 2002, he came out against an income tax increase.

And Franks says he's against an income tax hike.

There would be that little matter of feeding the Democratic Party interest groups, however.

And he has just been named a

"Taxpayer Friend"

by Jim Tobin's National Taxpayers United of Illinois.
 
He ranks as high as any Republican!

Or will he run for state representative, the "walk in the park" option?

Or lieutenant governor, an office, he might very well be able to pick off?  But will he be willing to stake his future on a tax hike promising Quinn or Hynes?

He could run for one of the financial offices where he could use his banking background?

In any event, it's past Labor Day.

Folks are waiting in McHenry County.

Vacating the legislative seat could set off quite a primary election among Republicans.  Maybe a Democrat will even file to replace Franks.

= = = = =
In the photo of the Rod Blagojevich Impeachment Committee hearing, State Rep. Jack Franks shakes hands with U.S. Senator Roland Burris after Burris' testimony.

Published first on McHenry County Blog.

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Math Impaired Teachers

by Cal Skinner

This will not be the first time I have taken errant folks to task about their inability to calculate percentages.

Remember,

3-16-9 Pam, Pam, Pam

3-14-9 Math-Impaired Liberal Says One Percentage Point Means 1%

2-8-9 Joel Weisman Falsely Frames the Income Tax Hike Issue

Through the whole income tax hike debate proponents have talked about the one or two percentage increase they favored.

Take a look at page ten of this Illinois Federation of Teachers publication called "Insight."

No need to wonder why Chicago school kids don't do well in math. (The IFT has most of its members in the Chicago Public School system.)

Take a look at option one:

Income tax increase

A 1 percent increase would generate
$3.7 billion; a 1.5 percent increase
would raise $5.6 billion, with the local
government match aiding cities and
counties meet serviced needs.

Oh, really.

In Fiscal Year 2008, Illinois collected almost $14.9 billion. One percent times $14.9 billion equals $149 million on my calculator.

And, just to show that the problem goes all the way to the top of the IFT, look at the letter from President Ed Geppert, Jr.

Here's one of his paragraphs:

"So here we stand in 2009. No sustainable revenue plan has been passed in this state for 20 years, and Illinois stands with an $11.5 billion deficit. There truly is no way out of this financial mess without increasing the state’s income tax rate by somewhere between 1 and 2 percent."

Posted first on McHenry County Blog, where lots of Labor Day Weekend articles appear.

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Hynes challenges Quinn and his tax plan

By Bethany Jaeger
The Democratic primary election between Illinois Gov. Pat Quinn and Comptroller Dan Hynes gained another dynamic Wednesday as Hynes officially announced his candidacy for governor with a proposal to raise the state income tax based on income.


Both political campaigns are staying true to their original slogans that we wrote about during the State Fair. Hynes says Quinn received his job by default after the legislature impeached former Gov. Rod Blagojevich and that Quinn has since failed to implement a consistent and calibrated agenda. Quinn, on the other hand, maintains that Hynes, as comptroller, has stood on the sidelines as a “shrinking violet.”

Before today, however, Hynes had not officially announced where he stood on an income tax increase other than saying the legislature and governor should look to cut spending first. On Wednesday, he announced, first in Chicago then in Springfield, a three-step plan that would rely on various cuts and efficiencies this fiscal year and propose a graduated income tax next fiscal year.

Because the state Constitution specifies Illinois’ income tax rate is a “flat” rate applied evenly to individuals, as well as a separate flat rate applied to businesses, changing the tax structure to a graduated rate would require a constitutional amendment. Hynes said he would want the General Assembly to approve a measure to put the question to voters about whether to change the Constitution in the November 2010 election.

The graduated rate, according to Hynes, would range from the current 3 percent on individuals to a new 7.5 percent, which Hynes said would only apply to individuals who make more than $1 million a year. He would not change the corporate rate. If instituted in January 2011, Hynes said the new tax would generate $5.5 billion to help close the budget deficit his second year in office.

Quinn, in his March budget proposal to the General Assembly, proposed raising the individual income tax rate from 3 percent to 4.5 percent and the corporate rate from 4.8 percent to 7.2 percent, but he would keep the rate “flat,” which would not require a constitutional amendment.

“Rather than taking years to enact through a constitutional amendment, it could have been done quickly through an act of the legislature,” said John Kupper, spokesman for the Taxpayers for Quinn campaign.

Quinn also wanted to triple the personal tax exemption, which he said in March would mean that about half of the state’s taxpayers would pay less, while the other half would pay more than they currently do.

Today, Hynes countered that Quinn would levy a 50 percent higher tax rate on all taxpayers, while his proposal would only increase taxes on those making more than $200,000 a year. “Because of the graduated income tax and the way it is designed, you’re actually going to pay more under Pat Quinn’s plan, even if you make a half a million dollars a year,” Hynes said in Springfield. “That is why his plan is not only inequitable and unfair, but really, wrongheaded and backwards.”

Both Quinn and Hynes use similar language — cut spending before seeking higher taxes — (we quoted Quinn as saying it in June, when budget negotiations hit a stalemate). Quinn cut $1 billion in spending already and said he is working toward another $1 billion as part of the final budget agreement for fiscal year 2010 (the current year).

But Hynes says Quinn’s approach to cutting is across-the-board and, therefore, unfair. Instead, one of Hynes’ cost-cutting proposals is to fire half of Blagojevich’s political employees or appointees making more than $70,000 a year. Hynes said his campaign identified 1,600 such employees through state payroll. Firing half of them, or 800 workers, would save $100 million a year, he said, but it would be up to the governor and his agency directors to determine which half to fire.

Other immediate cost-saving measures proposed by Hynes today include reducing discretionary grants, slashing contracts for advertising, consulting and other professional services and closing so-called tax loopholes by expanding the state sales tax to include such “luxury” services as Botox cosmetic injections, car and truck rentals and membership of private clubs. He’d also borrow $1.5 billion to pay down backlogged bills, which he said would leverage enhanced federal reimbursements temporarily available through the federal stimulus package.

Hynes said those would be the prelude to the second year, when he would then increase the income tax, merge the comptroller’s and treasurer’s offices and create two or three more gaming licenses to open new casinos, among other ideas. (See his proposals here.)

Several of his ideas — instituting a graduated income tax structure, building three new casinos, increasing the sales tax on cigarettes by $1, closing corporate tax breaks and prohibiting the state from rolling over unpaid bills into the next fiscal year — have been proposed within the past few years but have all stalled in the legislature.

In a phone interview shortly after the Springfield event, Hynes said legislators who opposed those ideas in the past might look at them in a different light under the current economic and fiscal circumstances. He added that his leadership style would differ. “I’d like to think that I have the ability to persuade lawmakers that this is the correct path. Part of that is leadership. Part of it is having a clear vision and being consistent, not wavering, not waffling and not changing your opinion, your position and your plan every week.”

Kupper of the Quinn campaign dismissed Hynes’ ideas as playing politics. “In a very real sense, this is a proposal that was put together for the benefit of a political campaign and not a serious effort to address the state’s fiscal problems,” he said. “It’s a lot of rehashed proposals that came right out of the political playbook 101. The question is better addressed to Dan Hynes as to how he is going to enact these things, since he’s pretty much been on the sidelines as these budget issues have been debated.”

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Lou Lang Explains Income Tax Fight

In Part 1 and Part 2 of looking at State Rep. Lou Lang's view of what really happened in the spring session of the Illinois General Assembly, he talked about how not enough votes could be garnered from Democrats, but that there were sufficient Republicans willing to vote for a (50%, not mentioned by Lang) income tax hike had not Republican Leader Tom Cross intimidated them.

This article continues with the questioning of Democratic Party McHenry County Board member Paula Yensen at last Wednesday's meeting of the McHenry County Democratic Party Central Committee meeting.

"(I was) just trying to follow it in the newspaper and wonder why people could not be working together.

"The not-for-profits have made cuts for the last ten years. They're five months, seven months in arrears in getting (state payments). Financial institutions are not lending (so they) can make payroll. I don't think people fully understand."

"I think they do understand," Lang replied, "but when politics rules over common sense, you know where it's at.

"There are elected officials who don't give a dame. They're looking at November 2, 2010.

"When a person gets most of his money from business interests...it won't matter to that legislator.

"They'll say it matters, but it doesn't matter.

"Regular people can't believe this. People say,

'These people really care about us.
I heard them say it.'

"But they don't care.

"The not-for-profit community dropped the ball her," Lang explained, pointing out that they came to Springfield for demonstrations, but that was not enough.

"But, how many of those thousands of people went to see their own legislator in their own offices?

"None, very few."

Lang then explained, "The last time Illinois raised income taxes not one single legislator in either chamber or party lost his next election."

Land did allow that people remember Republican Governor Richard Ogilvie losing to Dan Walker in 1972 after Ogilvie signed the bill imposing the income tax.

"If you explain to (constituents) why your doing what you're doing, they will (support you).

"But when gutless wonders stroll the Capitol, (it won't happen)."

= = = = =
At the Wednesday meeting you see above, from left to right, you see Marti Swanson in the foreground, Ed Riley, who ran for Greenwood Township Supervisor, former District 6 McHenry County Board candidate Robert Ludwig, District 5 McHenry County Board member Paula Yensen, Ed Rotchford, Bob Kaempfe, candidate for state representative against Mike Tryon, Nunda Township Trustee candidate Meredith Reid Sarkees, District 5 McHenry County Board member Jim Kennedy and Mike Bisset.

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Everything in limbo

By Bethany Jaeger, with Jamey Dunn and Hilary Russell contributing
Illinois’ human service providers, as well as other state contractors, remain in limbo as to whether they’ll receive state funding after July 1. The General Assembly finished its special legislative session this afternoon without sending a spending plan to the governor. Lawmakers aren’t scheduled to return until Monday afternoon (the Senate won’t be back until Tuesday), which some providers said would be too late. Providers, many of whom rallied at the Capitol yesterday, anticipate having to close their doors or lay off employees without a state operating budget in place by then.



“What’s going on right now is cruel, it’s cynical and it doesn’t need to be happening. And it should have been addressed this week,” Senate Minority Leader Christine Radogno said after the legislature adjourned. She added: “There is a lack of clarity, a lack of leadership, in terms of what is going on. And in the meantime, people are dangling in the wind thinking that their lives are going to be inextricably altered.”

She proposed enacting a temporary budget to keep state services going, uninterrupted, and to give service providers more predictability.

Gov. Pat Quinn continues to publicly reject the idea of a temporary budget and said lawmakers still have time to enact a full-year balanced budget within six days. But he said balancing the budget, which he projects will carry a $9.2 billion deficit, will require a two-year income tax increase to generate $4.2 billion. (Comptroller Dan Hynes calculated the deficit at $7 billion.)

Legislative leaders of both political parties have cast doubt on the governor’s ability to gain enough votes in each chamber to approve a tax increase by July 1, although House Minority Leader Tom Cross said a few of his members are leaning toward a tax increase if they see action on other efficiencies and long-term spending reforms first.

Senate Democrats maintain that they approved a version of a permanent income tax increase in House Bill 174, which never got called for a vote in the House. According to Sen. James Meeks, the caucus doesn’t want to give up on the idea of offering property tax relief and increased education funding. Meeks said a temporary increase would result in a permanent increase in two years. “Temporary should scream out to everybody saying, ‘In two years, they’ll be back.’”

There could be more immediate support for a short-term borrowing scheme. A plan backed by Quinn would issue pension obligation notes rather than bonds, which typically are repaid over longer periods of time with higher interest costs. The House advanced the plan, Senate Bill 415, today. It would allow the state to make its full contribution into the public employee pension systems and free up $2.2 billion to help plug the deficit.

“If we get $2 billion to help close the deficit, that’s a good thing,” Quinn said after finishing a series of meetings with all four legislative caucuses. “We’re making progress, but we still have $7 billion to go.”

The governor and all four caucuses appear to agree one goal: to reduce spending by another $1 billion. But they might disagree on how to do that.

Quinn said his administration could save about $125 million by mandating 12 unpaid days off, or furlough days, for state employees, including unionized workers. Layoffs also could be considered, he said, although he added that he wouldn’t pursue layoffs until after he and the General Assembly settled on whether the state would generate new revenues first. “Under our contract, we can lay off employees if we don’t have the money to pay them,” he said.

Anders Lindall, spokesman for the American Federation of State, County and Municipal Employees Council 31, said union leaders already met with the administration last week and determined that furlough days and layoffs wouldn’t save significant amounts of money. Henry Bayer, Council 31 executive director, said last week that even if every state employee worked the entire year unpaid, the state would only save about $3 billion. Lindall added this afternoon, “Any number of furlough days would be an insignificant savings to the state but a very real reduction in services.”

Cross said his caucus agrees with the need to look for $1 billion in cuts and recommends moratoriums on programs, furlough days and salary freezes, as well as reduced travel budgets.

Capital and recall
Two other items on hold include the $29 billion capital construction program and a provision that would allow voters to decide whether they wanted to change the state Constitution so they could recall the sitting governor.

Quinn said he will not sign the construction program without an operating budget in place. Democratic Sens. Martin Sandoval of Chicago and John Sullivan of Rushville said the capital plan and the operating budget have nothing to do with one another. In a Statehouse news conference, they joined organized labor groups to say Quinn has fallen through on his promise to immediately put people to work. "People are falling off the edge, losing their homes, having a very difficult time making ends meet, and he’s decided to hold the jobs bill as a political football until he gets his tax hike,” Sandoval said, citing the state’s 10.1 percent unemployment rate.

On the other hand, the Senate Democrats have held one of Quinn’s initiatives, House Joint Resolution Constitutional Amendment 31: a recall provision. Senate President John Cullerton said yesterday he would not call the provision for a vote until Quinn signed an ethics package that would limit the amount individuals, businesses and political organizations could donate to candidates. However, the Senate hasn’t even sent the measure, HB 7, to the governor’s desk.

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Quinn: Won't cut human service funding in half

By Bethany Jaeger
Without a state budget in place eight days before a new fiscal year starts, Gov. Pat Quinn said in Springfield on Monday that he would not accept a budget proposal that would chop state funding for human services by half, as advanced by Democrats May 31.



“So I want to make that clear to our legislators this week that whatever has been concocted up to now is insufficient, and hopefully we can work together to repair the oversights in revenue,” he said, previewing Tuesday’s special legislative session. “You can’t have a balanced [budget] if you’re short billions of dollars.”

His office estimates an $11.6 billion deficit next fiscal year.

But just how he will work with the legislature to enact a balanced budget before July 1 is a mystery, despite Quinn’s optimism that a few legislators who rejected a temporary income tax increase last month would support it this month “under the circumstances.” If an income tax increase failed again, however, he said he would not support the idea of a so-called month-to-month budget to keep the state operating as long as money remained available.

He did not specify how he would prevent cuts to human services, only that even if the state increased the income tax for two years, Illinois would still have to accept a “no-frills, lean government.” But, he added, “That doesn’t mean that the most important things for the most vulnerable people are left behind.”

Quinn has campaigned since last month for a two-year tax hike to stave off deep budget cuts to human services. He even used Monday’s ceremony to honor Scripps National Spelling Bee contestants to seek support from parents in the audience, whom he asked to “invest in our future, even in hard times.” He’s scheduled to continue his campaign Tuesday morning during what’s expected to be a large rally in the Capitol before the legislative session starts.

But approving an income tax increase any time soon will be difficult, given that Democrats have said they don’t have enough votes without Republican support. And Republicans have said they won’t consider a tax increase without action on Medicaid and pension reforms, which could take months to compile and to gain momentum.

Democrats in both chambers approved a bare bones budget at the end of May, but they have prevented the legislation from going to the governor’s desk (see Senate Bill 1197 for the lump sum spending plan; SB 1433 for authority to sweep excess money from dedicated funds; SB 1609 for authority to refinance state debt).

In a light-hearted plea to legislators, Quinn quizzed national spelling bee contestants by asking them to spell such words as “whistleblower,” “gridlock” and “mudslinging.” He asked one student to spell out “fortitude,” which he later defined as “doing very hard things for the common good, worrying about people above and beyond yourself.”

Also Tuesday, Quinn said he hopes the legislature will take another try to approve a measure that would allow voters to decide whether to change the state Constitution so they could recall elected officials. House Joint Resolution 31 passed the House last month and awaits Senate action. And watch for a new short-term borrowing proposal that could help the state fund most of its $4 billion pension contribution next fiscal year.

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Quinn thumbs his nose at legislature

by Jamey Dunn

Gov. Pat Quinn said today that balancing the state’s operating budget is his top priority and that the capital plan for construction projects should come only after legislators approve a spending plan. The move could be perceived as a dig at the legislature, which is doing the exact opposite.

At an annual Springfield event, the Illinois Governor’s Prayer Breakfast, Quinn said the so-called doomsday budget he released Monday was the “responsible” way for him to inform legislators and citizens about the consequences if lawmakers fail to approve new revenue sources to help balance the budget. Quinn has proposed an income tax increase to help repair a combined $11.6 billion deficit over this fiscal year and next, and he said that he thinks lawmakers will support it before session adjourns at the end of the month.

“We have to help education and public safety and health care,” he said. “And if we don’t have the revenue, there are going to have to be severe cutbacks.”

Quinn said that passing a budget to keep social programs in place should come before a capital plan, but lawmakers plan to pass parts of the capital bill as early as today. This is the first time Quinn has publicly voiced opposition to passing a capital plan before passing an operating budget.

“I want to tell the members of the General Assembly I know they want a lot of [capital] projects and so on, and so do I. But that is not coming before the priority of taking care of real live human beings.”

As for funding for the capital bill, Quinn said that he is still not enthusiastic about legalizing video gaming to help pay for it. However, he said that the challenges the state currently faces might spur him to consider a proposal he wouldn’t normally support. He urged legislators to be flexible about their positions, as well.

“Right now I think it is important for both parties, both houses of the legislature, everybody to become people of Illinois,” he said. “Put aside differences and put aside, maybe, some of their past positions if it means that we have to band together to save our state.”

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Will the "cutting committee" cut much?

By Jamey Dunn and Hilary Russell
The state’s budget deficit could be worse than Gov. Pat Quinn’s projection of $11.6 billion next fiscal year. But some education-funding reform advocates see a silver lining in that the dire budget constraints could open the door for a longstanding effort to restructure the way Illinois pays for public education.


They’re again supporting a so-called tax swap, which would increase the state income tax and expand the state sales tax to apply to services. The new revenues would help offer property tax relief. Sen. James Meeks, a Chicago Democrat who has been pushing the idea for seven years, says relying less on property taxes to fund public education would help address funding disparities between property rich and property poor school districts.

We’ll find out tomorrow morning whether such tax reforms will be included in a series of recommendations that a special bipartisan committee will pass along to legislative leaders as they try to figure out how to balance next year’s state budget. The special committee is led by a rare co-chairmanship of one Democrat and one Republican. Sen. Donne Trotter is the Democratic chairman. He said the committee is considering recommending such revenue changes as a tax swap, as well as other changes to the public employee pension system, that both parties can support.

“There’s probably going to be a larger stack of things that we could agree upon than things that we can’t,” Trotter said. However, he added that there’s a good chance that the committee could produce a majority and minority opinion reports.

Trotter said Meeks’ tax reforms have support from committee members of both political parties.

Legislators’ reluctance to raise state income taxes has been one of the main roadblocks to various tax swap proposals advanced in the past seven years, but Meeks said the likelihood of an income tax hike this year creates a “now or never” opportunity for reform. The latest proposal, SB 750, would raise the state income tax from 3 percent to 5 percent for individuals and from 4 percent to 8 percent for corporations.

While the tax reforms traditionally have been proposed as a way to reform education funding, Meeks said he’s open to using new tax revenues to plug the state’s budget deficit for up to two years. But then it would have to switch to fund education. If lawmakers only consider the deficit, he said, “we’ll end up raising taxes, but we won’t end up fixing anything.”

Ralph Martire, executive director of the Chicago-based Center for Tax and Budget Accountability, supports Meeks’ plan for education funding and said there’s an added reason (scroll down) to reform the state’s tax structure. “The bottom line is Illinois cannot get to a balanced budget situation without adjusting both of its major taxes,” he said. He added that expanding the state sales tax could allow for a lower rate.

The Taxpayers’ Federation of Illinois opposes the bill because, according to organization president Tom Johnson, property tax is a reliable revenue source for local governments even in hard times. He added that the state may not be able to keep up with the property tax relief, which he said could “vanish in a relatively short period of time.”

Tomorrow morning’s Budget Deficit Reduction Committee will wrap up four weeks of testimony, which started out by focusing more on what agencies and advocates couldn’t live without than what they were willing to cut. The last two meetings have changed the focus to more concrete examples of ways the state could generate money while it also saved money.

Sen. Matt Murphy, the Republican co-chair from Palatine, said: “I love the idea of restraining future growth for spending because there’s never gonna be enough tax revenue if we don’t get a handle on the spending. I look forward to coming out with a collection of deficit reduction measures that we think can help fill this hole and do it in a way that’s productive for the long-term benefits for the state.”

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About that "50% Increase"

As the graph below will show you, the much-balleyhooed "50%" tax increase fails to ring true. We found this out when looking at what the Effective tax rate is currently, versus what it would be under Gov. Quinn's plan. As you see, the tax increase tops out at about 20% for any family of 4 that could consider themselves middle class.

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Quinn Hits Business

Unmentioned in Governor Pat Quinn's budget address was what his 50% income tax hike proposal will do to Illinois business.

Here's what the Illinois State Chamber of Commerce says,

“If this plan were passed, Illinois would have the 5th highest corporate income tax rate in the nation, though we would be close to tied for second. Illinois at 9.7% would be surpassed only by Iowa at 12%, Minnesota at 9.8%, Pennsylvania at 9.99%, and DC at 9.975%. (All three of these states have graduated taxes, but the rates shown are the highest rate for that state.)

“This, in combination with lost incentives, would be one more reason for employers to look elsewhere to avoid Illinois’ long‐standing anti‐business climate.”

Since there are no mitigating increases in deductions for business taxpayers, the tax hike would be at least 50% on those who create jobs in Illinois.

Indeed, if “loopholes” are closed for business, its tax burden would increase by more than 50%.

Talk about a reason to think about leaving Illinois...

Or a reason not to expand or bring a new business to Illinois.

Posted first on McHenry County Blog, where you might be interested in reading

A $5 Billion Deficit, Plus $1 Billion a Year in New Spending Equals $11 Billion

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State of Illinois Governor Quinn’s Proposed Budget Summary

Source: State of Illinois FY2010 Budget Book



FY2010 General Funds Budget:

• Revenues - $33.076 billion (after new proposed revenues)
  
• Operating Expenditures - $30.662 billion
  
• Pay-back short-term borrowing - $2.318 billion
  
• Pay old FY2009 bills - $1.333 billion
  
• Remaining FY2010 budget deficit - $1.237 billion (likely carried over to FY2011)
  

CLOSING THE DEFICIT

Current FY2009 deficit: $4.317 billion

• REVENUE: New FY2009 Federal Stimulus funds: $2.155 billion
  
• REVENUE: Fund sweeps: $199 million
  
• CUT: Pension payments: $550 million
  
• CUT: Other spending decreases: $155 million
  
• INCREASE: One-time Medicaid backlog pay-down: $1.491 billion (necessary to get federal funds)
  

New FY2009 deficit: $2.748 billion.

The State of Illinois will borrow $2.25 billion to pay bills this year and pay it back in FY2010. That leaves $1.333 billion in bills carried over to FY2010, $835 of which was carried over to FY2009 from FY2008.



Projected FY2010 deficit: $7.289 billion

• REVENUE: New FY2010 Federal Stimulus funds: $1.843 billion
  
• REVENUE: Income and corporate income tax increase: $3.207 billion
  
• REVENUE: Loophole closures, fee increases, and fund sweeps: $1.054 billion
  
• CUT: Pension payments: $2.296 billion
  
• CUT: Other spending decreases: $1.303 billion
  

New FY2009 surplus: $2.404 billion.

The State will use some of that surplus ($2.318 billion) to pay-back short-term borrowing. The rest ($97 million) will go toward paying down the $1.333 billion in bills carried over from FY2009 to FY2010.

We will be updating our information all day and in the weeks ahead as it comes out. Head on over to Wonkish.com for updates and a nifty Quinn Tax Reform calculator.

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Senate Dems Chicken Out on Income Tax Hike Measure

When I skimmed Family PAC's email announcing the defeat of the Democratic Party-backed constitutional amendment to allow a progressive income tax in Illinois, I saw the number 35 and thought, “That was close.”

It takes 36 votes, a two-thirds majority, to pass a constitutional amendment in Illinois.

But when I found the roll call, I saw that the measure got 35 “No” votes. (Click to enlarge the roll call image.)

That meant almost half of the senators in the Democratic Party bailed out.

Perhaps the phone calls that Paul Caprio's group made to Downstate Democrats helped win the day. His press release follows:

SPRINGFIELD - 4:28PM - APRIL 29
GRADUATED INCOME TAX AMENDMENT DEFEATED IN ILLINOIS SENATE

Downstate Democrats joined with Republicans today in decisively defeating an attempt to put a graduated income tax proposal on the Illinois ballot this
November. The vote of 35 no/19 yes and 1 present was so decisive that the proposal is now dead for this session.

The taxpayers of Illinois have been saved from hundreds and millions of dollars of excessive taxes and the business climate in Illinois has been saved from further erosion.

Family-Pac made more than 23,000 live transfer calls in six target Senate districts that resulted in more than 766 constituent calls to legislators in these districts during the past week. In addition to that, we made more than 81,000 calls across the state where voters were asked to call their state senator.

April 29, 2008 - A good day... for Illinois taxpayers.

Paul Caprio

Maybe Senate Democrats have been following the travails of their favorite presidential candidate and concluded that his coattails, even in Illinois, may not be as long as they thought.

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The new "tax swap"

Senate President Emil Jones Jr.’s name appears on the list of sponsors of a version of a “tax swap” that would reform the way Illinois pays for public education. His support is a reversal from the Democratic leaders’ alliance with the governor last year but consistent with Jones’ stances in years before that. Support from the chamber leader is a big boost for Sen. James Meeks and Sen. John Cullerton’s measure, but the bill has two main hurdles: 1) Gov. Rod Blagojevich’s expected veto of anything that increases state income taxes and 2) the curse of gaming legislation, or getting so weighed down by trying to please everyone that the bill implodes and goes nowhere.

The measure advanced today from the Senate Education Committee, the first of many public hearings planned for this legislation before it’s ready for a vote by the full Senate.

Senate Bill 2288 is the new Senate Bill 750, but it has major differences. (Some are mapped out by Senate Democrats here. The main difference is that the new version would raise a lot more revenue — $7.2 billion — to do a whole lot more, funding a statewide infrastructure program and paying down state debt. Specifically, highlights include $633 million for early childhood and primary education, $300 million for higher education, $2.9 billion for property tax relief adjusted for inflation each year, $600 million for a family tax credit adjusted for inflation each year, $1 billion for a road and school construction plan and more than $1 billion for state pension and Medicaid debt.

“The goal of this bill is to pay off our debts,” Cullerton said in the committee hearing. He later added, “Not one penny is going to the operations of state government.”

Some Republicans in the committee found that hard to believe, but Cullerton said the sponsors eagerly seek input from the GOP and the House to codify better language. The sponsors still have the same list of supporters and opponents as 750. Most education and labor groups support it. Opponents include business groups and the Illinois Department of Revenue. (One school board in Chicago’s northwest suburbs of Palatine and Schaumburg opposed the property tax relief portion and said schools across the state can’t trust Illinois government to deliver, but those witnesses also said they supported many funding reform ideas in the legislation.)

The way the measure would raise the money is by increasing the personal income tax rate from 3 percent to 5 percent and the corporate rate from 4.8 percent to 8 percent. It also could, although it doesn’t yet, take back $800 million from the portion of the state income tax revenue that local governments currently receive.

On the spending side, the measure lists general initiatives but doesn’t specify where the money would go. Also absent, so far, are “accountability” measures, or safeguards for how state and local governments spend the money as intended. That’s a necessary component for Democratic Sen. Susan Garrett of Lake Forest. She voted “present” in committee to symbolize her concerns. “There has to be oversight. It’s not going to happen with this magic wand. I could never support this, especially from my area, without some major, major reforms.”

Meeks said those reforms are going to be drafted after collecting ideas in a series of public hearings, which is particularly important when “nobody trusts us to do what we say we’re going to do.”

We’ll have more details as they unfold. In the meantime, it’s safe to say this version isn’t going to advance for a while, maybe months.

The governor’s response is, according to an e-mail from spokeswoman Rebecca Rausch: “The push for an income tax increase isn’t new in Springfield. The governor’s position hasn’t changed. He thinks we should cut taxes, not raise them — especially at a time when families are already dealing with higher gas bills, higher prices for goods and stagnant wages.”

Jones’ spokeswoman, Cindy Davidsmeyer, said the Senate president has said and continues to say that he will not call this type of controversial measure for a vote on the Senate floor unless it has enough votes to pass — that’s 30 to pass and 36 to override a governor’s veto. Considering all the work that needs to be done to complete the legislation and all the GOP recruiting that needs to happen before the measure has a veto-proof majority, it’s optimistic to think that the bill could be called for a vote before May 31, as Meeks would like.

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Clarification

Last week, I reported about revenue ideas, specifically mentioning an income tax increase. Thanks to commenters, I realize the need to clarify two things:

First, such business groups as the Taxpayers Federation of Illinois and the Civic Committee of the Commercial Club of Chicago said last year they could swallow a state income tax increase if Illinois also — or first — enacted reforms to control such costs as public employee pensions and retiree health care benefits. In last week's post, I mentioned the portion about the Taxpayers' Federation of Illinois willing to support an income tax increase but did not mention the other side of the equation – its belief in the need to take steps to address the structural deficit. See David Eldridge's comments at the bottom of this post. (I also wrote about both sides of the equation last spring.) And more background can be found in the Civic Committee's full December 2006 report that suggests raising money by increasing income taxes and expanding sales taxes while also cutting costs and reforming the education funding system.

Second, both groups recommended increasing the personal income tax rate from 3 percent to 4 percent, which is not the same thing as a 1 percent increase. See Cal Skinner's comment at the bottom of this post. (More context: The Civic Committee's report also recommended increasing the corporate income tax rate from 4.8 percent to 6.4 percent and expanding the state sales tax to apply to consumer services.)

Be specific, please
State legislators would have to be more specific in the state budget when they requested money for projects within their districts under a measure that sailed out of the House today. They would have to spell out who requested the money, what it's for and whom it would benefit. Sponsor Rep. Patricia Reid Lindner, an Aurora Republican, called it a good government measure aimed to make the budget-making process more transparent, as opposed to the common practice of slipping in vague descriptions of rather hefty grants for local projects, a.k.a. pork.

The measure received 99 supporting votes and one in opposition, but a few members voiced concerns about whether the rules would actually work as intended. Rep. David Leitch, a Peoria Republican, was the lone “no” vote because the requirement could draw out the process if simple errors were made in the state budget, he said. For instance, a drafting error prevented the state from awarding a grant to a cancer center in his district even though it had received legislative approval. “You're absolutely correct. We should provide a description. We should provide transparency. But this would be a very impractical way to accomplish your worthwhile goal.”

The measure now goes to the Senate, where lawmakers predict it will have a tougher time getting approved.

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Tax news and something fun

The Taxpayers’ Federation of Illinois' board of trustees voted to provide “qualified support” to SB 572, Rep. Julie Hamos’s measure to give a much-needed boost to Chicago-area transit and to give some more money for operating costs of downstate public transit systems. I’ll try to post the association’s position statement as soon as it’s available.

Here's the federation's statement supporting Hamos' legislation:
• "TFI supports the pension, healthcare, and governance reforms in the bill. TFI has taken the position that reforms to spending, such as spending on pensions and healthcare, should be prerequisites to any increases in revenue. TFI believes that the reforms agreed to between the Chicago Transit Authority (“CTA”) and the relevant unions to, among other things, increase contribution rates and increase the retirement age to 65 are positive steps to reining in costs. TFI believes these reforms are an example of the types of reforms the State should undertake in the future to reduce its own cost structure."

• "TFI supports the sales tax increases in the bill as reasonable, targeted increases to fund transit needs. Given that transit use is regional to a particular area, TFI believes an increase in the sales taxes in Chicagoland is a reasonable revenue source since it will be targeted primarily on the taxpayers of the area that is serviced by the Regional Transportation Authority (“RTA”)."

• "TFI previously worked with the Illinois Association of Realtors (“IAR”) to obtain the referendum requirement for home rule municipalities. The provision in SB 572 grants an exception to the requirement for the limited instance of this particular tax imposition in Chicago. While TFI is concerned about this exception, we acknowledge and support the fact that the bill does not rescind the overall requirement for home rule municipalities to seek voter approval of the imposition or increase of real estate transfer taxes."

• "TFI also believes that reasonable fare increases designed to reflect the growth in operational costs should be part of any future fiscal considerations of the RTA and its service boards."

Tax climate
The national Tax Federation also released its 2008 State Business Tax Climate Index, which is supposed to rank states based on how “business friendly” they are. The news release says the index “measures how well a state's tax system encourages investment by maintaining a broad tax base and low rates.” It considers the corporate tax, individual income tax, sales tax, unemployment tax and property tax.

Illinois places 28th overall. Here’s Illinois’ rankings in the sub-groups:
Corporate income tax: 29th
Individual income tax: 12th
Sales tax: 32nd
Unemployment insurance tax: 42
And property tax: 40

The report says Illinois, along with Pennsylvania, Indiana, Michigan and Colorado, are in the top 12 for the individual property tax because each state uses a single, low rate. Watch for my November column about Chicago's property tax system.

Illinois placed 27th overall last year and 29th in 2006. That’s down from placing 19th in 2003, the first year the group published the report.

“Good state tax systems levy low, flat rates on the broadest bases possible, and they treat all taxpayers the same,” the federation says. “Variation in the tax treatment of different industries favors on economic activity or decision over another. The more riddled a tax system is with these politically motivated preferences the less likely it is that business decisions will be made in response to market forces.”

Here’s the executive summary of the background paper, and here’s the full background paper. You can access the full report here.

By the way, this is the same group that said Gov. Rod Blagojevich’s failed gross receipts tax idea was the “largest single-year state tax increase this decade.” I mention that in my May feature about the state’s business climate. Watch for more analysis by Charlie Wheeler, director of the Public Affairs Reporting master’s program at the University of Illinois at Springfield, next month.

Something fun
You may be interested to see which presidential candidates align with your views. WQAD News Channel 8 linked to this 11-question survey, which is not scientific, developed by Minnesota Public Radio. It’s here. It's quick and easy, but the site says it's not meant to pick your candidate for you. It's designed to inform the public about the candidates' stances on a variety of issues.

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Now is the time for the General Assembly to define and implement Tax Fairness

The debate on implementing tax fairness just opened up.

I think there's a fairly firm consensus in the General Assembly that our tax system is unfair. We tax people in poverty too much and we do not tax our state's largest corporations and wealthiest individuals nearly enough. Middle-class people probably are taxed a bit too much as well, particularly those in low-wealth communities.

The Governor has put tax fairness at the center of this year's session, rightfully pointing out that the corporate income tax is essentially broken as it lets the biggest corporations off the hook.

He hasn't pointed out that our 3% state income tax with a low personal exemption and a low earned income tax credit means that people who make six figures pay a smaller percent of their income in state and local taxes than people who make 40 grand or less. That's backwards and this is the month to change it.

The question before each Member of the General Assembly is how to change it.

The Governor's proposal to implement a tax on the gross receipts of the largest businesses in Illinois has largely been rejected as, in the Speaker's words, a “regressive” tax. The House, by the way, deserves credit for taking the Governor's proposal seriously with an eight-hour hearing before the entire House. That high-level policy debate is the crux of transparent governing and we should have more of it. Why can't the Governor appear before a joint session of the General Assembly every month for a British-style Question Time? That would be fun.

One of the most illuminating exchanges was between Representative David Miller and Governor Blagojevich, after the Governor said that any income tax increase – no matter how progressive -- is “off the table” as he would veto it, Representative Miller matter-of-factly reminded the Governor that the General Assembly could simply override the veto. The Governor's response: I'll campaign against any income tax increase next year! Why? Because “it's wrong.”

Here is the worst aspect of the Governor's position: he rejects, vilifies and obfuscates the existence of a progressive income tax. The absolute best way to reverse our regressive taxes is to raise income taxes on high incomes (personal and corporate) and lower taxes on low incomes. This is not difficult to do.

Our state Constitution does require a non-graduated income tax rate, which is why we have a flat rate of 3%. The Governor's position has been that this provision of the Constitution precludes any sort of progressive income tax – but that's just not true.

It would be great if we could have a federal-style income tax where the first $15,000 of income isn't taxed at all, and the next $40,000 of income is taxed at 15%, and the next $60,000 of income is taxed at 28% and then income above $250,000 is taxed at 35%. But, we don't.

What we can do, however, is raise the rate on all income to 5%. That would raise the revenue from the people who have it the most, won't miss it at all, benefit from the Bush tax cuts and (crucially) can write-off the higher state income tax they pay off of their federal returns so that the state as a whole will pay less in federal taxes.

What about people who make less than $50 grand – or people who make less than $15 grand? If we raise the income tax rate to 5%, they will pay more too, and that's the reason why the Governor thinks it is wrong to raise the income tax. There is an easy way, however, to make sure that the middle class and the poor do not pay more in income taxes in order to satisfy the Governor.

That's to raise the personal exemption to $10,000. It's current $2100. Or in other words, cut a $500 check per exemption to every taxpayer instead of what we do now which is cut a $63 check per exemption to every taxpayer (3% of $2100). That exemption is essentially meaningless.

For people with not a lot of money, $500 off of taxes is a lot. And it's probably enough to wipe out any tax they might owe: you have to earn $10,000 per person in order to owe anything (since 5% of $10,000 is $500). So a family of four wouldn't pay any state income tax at all if they earn less than $40,000. And lots of legislative districts have an median family income of less than $40,000. That is about the average family income in our state.

Compared to our current state income tax which hits people as soon as they earn $2100, a $10,000 personal exemption even with a 5% income tax would make most people better off, particularly as they have more exemptions to take (that is, kids).

Here's how it works with one exemption (look for the blue highlight to see the break-even point):

Gross family income	Number of exemptions	Deduction	Value of exemption	Adjusted income	Rate	Tax
$10,000.00	1	$2,000.00	$2,000.00	$8,000.00	0.03	$240.00
$20,000.00	1	$2,000.00	$2,000.00	$18,000.00	0.03	$540.00
$30,000.00	1	$2,000.00	$2,000.00	$28,000.00	0.03	$840.00
$40,000.00	1	$2,000.00	$2,000.00	$38,000.00	0.03	$1,140.00
$50,000.00	1	$2,000.00	$2,000.00	$48,000.00	0.03	$1,440.00
$60,000.00	1	$2,000.00	$2,000.00	$58,000.00	0.03	$1,740.00
$70,000.00	1	$2,000.00	$2,000.00	$68,000.00	0.03	$2,040.00
$80,000.00	1	$2,000.00	$2,000.00	$78,000.00	0.03	$2,340.00

and now here is with a higher income tax rate (5%) and a $10,000 personal exemption.

Gross family income	Number of exemptions	Deduction	Value of exemption	Adjusted income	Rate	Tax
$10,000.00	1	$10,000.00	$10,000.00	$0.00	0.05	$0.00
$20,000.00	1	$10,000.00	$10,000.00	$10,000.00	0.05	$500.00
$30,000.00	1	$10,000.00	$10,000.00	$20,000.00	0.05	$1,000.00
$40,000.00	1	$10,000.00	$10,000.00	$30,000.00	0.05	$1,500.00
$50,000.00	1	$10,000.00	$10,000.00	$40,000.00	0.05	$2,000.00
$60,000.00	1	$10,000.00	$10,000.00	$50,000.00	0.05	$2,500.00
$70,000.00	1	$10,000.00	$10,000.00	$60,000.00	0.05	$3,000.00
$80,000.00	1	$10,000.00	$10,000.00	$70,000.00	0.05	$3,500.00

For people who earn less than $20,000 – that's $10 an hour with a full-time job, and remember our state's minimum wage is only $6.50, and remember, about a fifth of the entire state's population earns less than $20,000 a year – they are better off under a 5% state income tax with a $10,000 exemption than they are under a 3% state income tax with a $2,000 exemption. This is about the break-even point, so anyone who makes more than $20,000 as a single filer would pay more under the change.

Let's skip ahead to people with two exemptions and watch the break-even point rise dramatically. People with two exemptions include married couples and single parents with one kid.

Here is the status quo:

Gross family income	Number of exemptions	Deduction	Value of exemption	Adjusted income	Rate	Tax
$10,000.00	2	$2,000.00	$4,000.00	$6,000.00	0.03	$180.00
$20,000.00	2	$2,000.00	$4,000.00	$16,000.00	0.03	$480.00
$30,000.00	2	$2,000.00	$4,000.00	$26,000.00	0.03	$780.00
$40,000.00	2	$2,000.00	$4,000.00	$36,000.00	0.03	$1,080.00
$50,000.00	2	$2,000.00	$4,000.00	$46,000.00	0.03	$1,380.00
$60,000.00	2	$2,000.00	$4,000.00	$56,000.00	0.03	$1,680.00
$70,000.00	2	$2,000.00	$4,000.00	$66,000.00	0.03	$1,980.00
$80,000.00	2	$2,000.00	$4,000.00	$76,000.00	0.03	$2,280.00

And here is a more progressive income tax at a 5% rate and a $10,000 exemption.

Gross family income	Number of exemptions	Deduction	Value of exemption	Adjusted income	Rate	Tax
$10,000.00	2	$10,000.00	$20,000.00	-$10,000.00	0.05	$0.00
$20,000.00	2	$10,000.00	$20,000.00	$0.00	0.05	$0.00
$30,000.00	2	$10,000.00	$20,000.00	$10,000.00	0.05	$500.00
$40,000.00	2	$10,000.00	$20,000.00	$20,000.00	0.05	$1,000.00
$50,000.00	2	$10,000.00	$20,000.00	$30,000.00	0.05	$1,500.00
$60,000.00	2	$10,000.00	$20,000.00	$40,000.00	0.05	$2,000.00
$70,000.00	2	$10,000.00	$20,000.00	$50,000.00	0.05	$2,500.00
$80,000.00	2	$10,000.00	$20,000.00	$60,000.00	0.05	$3,000.00

Now we're at $40,000 of family income for a family of two (where just under half the population lives). That's a $20/hour job. Not bad and getting tougher to find as our manufacturing jobs are disappearing and service jobs rarely pay that much.

Here everyone with two exemptions who makes less than $40,000 is better off with a higher
tax rate (raising taxes!) and a higher personal exemption than they are today. Anyone who makes more than that will pay more.

Let's skip to the comparison for four exemptions (a married couple with two kids or a single parent with three kids):

Gross family income	Number of exemptions	Deduction	Value of exemption	Adjusted income	Rate	Tax
$10,000.00	4	$2,000.00	$8,000.00	$2,000.00	0.03	$60.00
$20,000.00	4	$2,000.00	$8,000.00	$12,000.00	0.03	$360.00
$30,000.00	4	$2,000.00	$8,000.00	$22,000.00	0.03	$660.00
$40,000.00	4	$2,000.00	$8,000.00	$32,000.00	0.03	$960.00
$50,000.00	4	$2,000.00	$8,000.00	$42,000.00	0.03	$1,260.00
$60,000.00	4	$2,000.00	$8,000.00	$52,000.00	0.03	$1,560.00
$70,000.00	4	$2,000.00	$8,000.00	$62,000.00	0.03	$1,860.00
$80,000.00	4	$2,000.00	$8,000.00	$72,000.00	0.03	$2,160.00
$90,000.00	4	$2,000.00	$8,000.00	$82,000.00	0.03	$2,460.00

Now, with a more progressive income tax (even with the Constitutional flat rate)

Gross family income	Number of exemptions	Deduction	Value of exemption	Adjusted income	Rate	Tax
$10,000.00	4	$10,000.00	$40,000.00	-$30,000.00	0.05	$0.00
$20,000.00	4	$10,000.00	$40,000.00	-$20,000.00	0.05	$0.00
$30,000.00	4	$10,000.00	$40,000.00	-$10,000.00	0.05	$0.00
$40,000.00	4	$10,000.00	$40,000.00	$0.00	0.05	$0.00
$50,000.00	4	$10,000.00	$40,000.00	$10,000.00	0.05	$500.00
$60,000.00	4	$10,000.00	$40,000.00	$20,000.00	0.05	$1,000.00
$70,000.00	4	$10,000.00	$40,000.00	$30,000.00	0.05	$1,500.00
$80,000.00	4	$10,000.00	$40,000.00	$40,000.00	0.05	$2,000.00
$90,000.00	4	$10,000.00	$40,000.00	$50,000.00	0.05	$2,500.00

90 grand! That's the break-even point!

Everyone who makes less than $90,000 in family income with four exemptions pays less with a 5% income tax rate and a $10,000 exemption than they do today.

That's a lot of middle-class (and upper-middle-class) families in both D and R districts.

This is just to show that a progressive income tax is very possible and can cut taxes for lots of
low-income and working people who are paying too many taxes now because we don't tax high incomes and corporations enough.

That's how it should be.

There are other important ways to make our tax more fair -- increasing the earned income tax credit and either closing corporate tax loopholes or instituting an alternative minimum corporate income tax or even perhaps a gross receipts tax that only affects the highest grossing corporations.

But for those of us who believe in a more progressive tax, we have a challenge that so far we have not really met and that is to explain to each Member of the General Assembly exactly how each of these low-income tax cuts (a higher personal exemption of the earned income tax credit) actually works to deliver tax cuts to the people who need it most.

Tax policy is not intuitive or obvious and unless we do a better job showing Members exactly how taxes are not progressive now and how to make them more progressive, we are unlikely to overcome legislators' natural inclination against raising taxes. And ultimately, our task is to convince voters that they stand to benefit from raising taxes on incomes above their own as it is often too much to ask Members to get ahead of their voters.

This is the crux of the communications challenge: we need to convince lower-income voters (who usually have less education) that raising taxes on high incomes while cutting taxes on lower incomes is good for their bottom line. We need to convince voters that progressive tax policy is the best rural economic development and inner-city economic development the state can possibly offer – because it is.

750, the twin bills in the House and Senate that raise the income tax to 5%, expand the sales tax to include services and invest the revenue in education, human services and pension payments, also holds harmless lower incomes from the higher taxes. This is a great step and right now 750 must be considered the leading proposal before the General Assembly.

One problem, however, is that the low-income tax cuts in 750 (the Family Tax Credit) are neither obvious nor simple to explain. The Family Tax Credit is, as I understand it, a tax credit off of the higher state income tax that compensates for both the expected higher sales tax and the higher income tax that lower-income residents would pay. There is a worksheet that calculates the size of the credit based on income and exemptions which will result in everyone making less than $50,000 or so paying the same amount under 750 than they do today with a 3% income tax and a non-service sales tax.

The concept is sound and deserves to be at the center of the debate, but there are two potential improvements worth considering. One is that the bill essentially asks legislators to trust that the Family Tax Credit will work, as the mechanism is not clearly explained (for every $2,000 of income, how much is the Family Tax Credit worth?). The second is that instead of cutting taxes for those earning less than $30,000 or so, 750 keeps the tax burden the same. 750 makes our tax more progressive by raising taxes on people making more than $50,000 or $60,000 or so, which is good (since our state's long-term economy is suffering from a low-tax and thus low-investment status, particularly in education and transportation), but does not make progress on the other side to cut taxes on low-income people which would do the most good to our economy (as low-income people spend locally almost all the money they save unlike high-income people who invest their money in global vehicles like mutual funds or second homes).

This is the month to build on the Governor's campaign for Tax Fairness in the General Assembly. Let's seize it!

[cross-posted at djwinfo]

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