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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Similar concepts, new context

One week before Gov. Pat Quinn proposes his first state budget to the General Assembly, legislators and advocates of all stripes are revisiting a lot of issues they tried but failed to enact during the Blagojevich Administration. This time, there’s a new context:

1. Legislators and Statehouse insiders trust Quinn more than they trusted Blagojevich.
2. Senate President John Cullerton has a better working and personal relationship with House Speaker Michael Madigan than did former Senate President Emil Jones Jr.
3. The economic and fiscal crises have sparked a new sense of urgency to find quick fixes at the same time they have inspired a willingness (however reluctant) to pursue more long-term reforms.

Whether the new context and new players actually will foster consensus and meaningful changes to revenue and spending, however, is yet to be seen. At this point in the spring session, it’s still all talk. Here are a few examples:

Gaming for capital
Republican leaders oppose increasing the state sales tax on gasoline to pay for a major construction program. Instead, they rekindled ideas to fund a capital program for schools, mass transit and infrastructure projects by expanding gaming. Their goal is to avoid raising any state taxes in a recession.

“Right now is absolutely not the time to be raising taxes on people who are struggling themselves,” said Senate Minority Leader Christine Radogno.

She and House Minority Leader Tom Cross propose expanding gaming to generate $1 billion in new revenue, which would help finance a $25 billion capital program. (They propose bonding about $12 billion, tapping $11 billion in the dedicated Road Fund to pay for transportation projects and leveraging about $3.5 billion from federal and local matching funds.)

Their gaming ideas include recurring proposals to allow a Chicago casino, expand positions at existing gaming facilities and enter a public-private partnership so that private investors manage the Illinois Lottery while the state continues to own it. Newer ideas include allowing video poker, as proposed in HB 4329, which is sponsored by one of Madigan’s assistant majority leaders, Rep. Frank Mautino of Spring Valley. Republicans also mentioned allowing Lottery tickets to be sold online, a proposal previously advanced by Cullerton.

Madigan took gaming off the table last year, but his spokesman, Steve Brown, said this is a new year. However, he said gaming tends to be a regressive source of revenue that usually generates a bunch of hype before falling by the wayside.

Senate Majority Leader James Clayborne said gaming for capital is still on the table in his chamber.

Tax reforms for education and economy
Ralph Martire, executive director of the Chicago-based Center for Tax and Budget Accountability, reintroduced a concept of increasing the state income tax rate and expanding the state sales taxes to cover services. The goal is to reform the way the state pays for public education and to reduce the burden on local property taxes.

Cutting back on state spending during a recession may sound logical, Martire said, but “it is quite clearly the absolute worst thing the state of Illinois could do.”

He joined two leaders in the Illinois Legislative Black Caucus to cite new evidence from Mark Zandi, Moody’s Economy.com’s chief economist, that the idea could help reduce the length of the economic recession in Illinois by preserving thousands of jobs and helping taxpayers spend money in their local economies.

The plan has been proposed in various forms before and would increase state income taxes, expand state sales taxes and provide targeted tax relief to low- and middle-income taxpayers. He added that broadening the sales tax to apply to services could reduce its rate, although it would be a hard sell to Cook County residents who already pay some of the highest sales tax rates in the country.

Sen. James Meeks, a Chicago Democrat and longtime sponsor of education funding reform measures, said Blagojevich is no longer in a position to threaten to veto tax reforms, and Cullerton has been a co-sponsor of such reforms. However, he added, his peers in the Senate likely would not support an income tax increase if it didn’t lead to education funding reform and property tax relief.

GOP budget reforms
By Hilary Russell
House Republicans flatly disagree and say Illinois has a spending problem, according to House Minority Leader Tom Cross.

He joined his GOP Caucus members and John Tillman, chief executive officer of the Chicago-based Illinois Policy Institute, a nonpartisan research organization, to propose budget reforms that would help reduce the $9 billion deficit and increase accountability. Introduced today in a Statehouse news conference, the proposals include:

The Sunshine Act (HB 4134) would create a volunteer commission of four legislators and four members of the public to review each of the state’s executive branch programs. The bill is sponsored by Rep. David Reis, a Willow Hill Republican. The state does not have an accurate list of existing programs, making it difficult for lawmakers to keep track of them, GOP members said.

Reis is also sponsoring the Stimulus Watch Act, which would require the General Assembly’s approval to use federal stimulus funds to create new state programs. Once the funds run out for a particular program, it would end.

“Pay as You Go Spending” (HB 3189), sponsored by Rep. Mike Connelly, a Lisle Republican, would implement a start and end date for new state spending programs. Just to add a program another must be eliminated.

Rep. Darlene Senger, a Naperville Republican, is co-sponsoring a constitutional amendment that would change the required number of votes to raise taxes. Currently, a majority of 60 votes in the House and 30 in the Senate is needed to increase fees or taxes. Senger’s proposal would increase the required number of votes to a “supermajority,” or 71 votes in the House and 36 in the Senate, making it more difficult to pass tax bills.

Rep. Lou Lang, a Skokie Democrat, said that the Republican’s timing was more showboating for their constituents than offering real solutions. “I find it very interesting that whenever there is a public policy decision to be made and the facts are clear that many people look for a political peg to take the chance to hang their hat on rather than take any political risk whatsoever.”

Gun control vs. gun rights
By Jamey Dunn
On the same day that thousands of people came to the Capitol building to participate in the annual gun owner lobbying day, every gun control measure voted on in a House committee advanced to the floor. A feeling of déjà vu was in the air.

Two of the gun control measures that passed through the committee today were proposed last session by the same two Democrat sponsors from Chicago. House Bill 12, sponsored by Rep. Luis Arroyo, would limit handgun purchases to one per person per month. House Bill 165 , proposed by Rep. Edward Acevedo, would ban semi-automatic assault weapons.

Other measures before the committee included House Bill 179, proposed by Chicago Democrat Rep. Deborah Graham, which would require that guns must either be equipped with gun locks or stored in lock boxes around minors. House Bill 180, also sponsored by Graham, would make gun dealers register with the Illinois State Police, who could then do spot checks on the dealers.

Rep. Brandon Phelps, a Democrat from Harrisburg, supports gun rights and is pushing for a few different bills that would allow counties to decide if they wanted to allow concealed carry of guns. One concealed carry bill sponsored by Sen. John Jones, a Republican from Mount Vernon, did not make it out of the Senate Public Health Committee yesterday.

Special elections
Two special election bills were killed today in a partisan showdown in the House Executive Committee. The hearing only included Cross’ special election bill and one proposed by Rep. Jack Franks, a Democrat from Woodstock. Both votes split along party lines. Republicans on the committee were visibly miffed and protested the demise of the bills.

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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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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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