2 First We Should Acknowledge "Taxes are the price we pay forcivilization.“----Justice Oliver Wendell Holmes, Jr.Although we love to grumble about them, taxes are essential to society. Taxes ensure that services vital to our life together in community are provided: education for our children, public safety, the construction and maintenance of roads, and so forth. TAXES ARE GOOD! We only have a right to grumble about them when they are not imposed fairly, efficiently, and adequately. When our tax system is flawed, we should take action to correct it.
3 A Fair and Graduated Tax Could… Make the system more fair by taking into account a person's ability to pay and asking more of those with higher incomes;Bring about structural changes that will help repair the state's budget long-term;Spur the economy by increasing the disposable income of middle and lower income Illinoisans.Why do we feel that now is the time to do away with the flat income tax? The graduated rate income tax has these advantages over the flat income tax: read slide
4 Unfair Inflexible Inadequate Illinois Taxes are… Here is our current situation: (slide) And we can do very little about it because the IL Constitution does not allow us to use the tool of a graduated income tax.
5 Unfair because the Top 1% Pay a Smaller Percentage of their Income in Total State and Local Taxes than the Bottom 20%Includes all State Sales, Excise, Property and Income TaxesSource: Institute on Taxation and Economic Policy, Who Pays? A Distributional Analysis of Tax Systems in all 50 States, p. 52, 4th Edition January 2013
6 But the top 10% have a huge share of the country’s income "The top 10% of earners took more than half of the country's total income in according to an updated study by the prominent economists Emmanuel Saez and Thomas Piketty. The top 1% took more than one-fifth of the income earned by Americans, one of the highest levels on record since 1913, when the government instituted an income tax." ..."Mr. Saez and Mr. Piketty have argued that the concentration of income among top earners is unlikely to reverse without stark changes in the economy or in tax policy." from “The Rich Get Richer Through the Recovery” by Annie Lowrey, NY Times 11/24/13.
7 Illinois taxes are inflexible because… Our income tax is mandated in the constitution to be a flat tax, which cannot be changed without a constitutional amendment.Our tax system depends on the lowest 80% of its taxpayers, whose income is eroding, while ignoring where income is growingOur tax system overlooks the fastest growing part of its economy – services - and continues to focus on consumer goods and manufacturingIn addition to being unfair, IL taxes are inflexible because (read slide)
8 Illinois has a structural deficit – what is that? “In simple terms, the structural deficit means the cost of providing public services in Illinois will grow with the economy and population over time, but state revenues will not. One of the main reasons state revenue growth does not track population and economic growth is Illinois focuses its revenue collection on a diminishing portion of the economy—the incomes of low and middle income families, which are flat or declining in real terms over time.”Ralph Martire, Chicago Tribune OpEd, 2/28/2012Illinois taxes are inadequate because Illinois has a Structural Deficit (slide)
10 And the Flat Income Tax Increase Expires in 2015. Rate Structure ChangeIn 2015, the personal income tax rate drops from 5% to 3.75%In 2025, the personal income tax rate drops from 3.75% to 3.25%Revenue ImpactAlong with reduction in the corporate tax rate, this will result in a total loss of $7 billion; $2 billion in FY 2015 and $5 billion in FY 2016, far more than the $5.6 billion lost during the Great Recession **The Policy Center for Voices for Illinois Children, Sept. 2013Exacerbating our situation is the scheduled expiration of the flat tax increase in NOW is the time to act!
11 Was the Temporary Tax Increase Worth It? (deficit in billions)The temporary tax did not accomplish its goal, but was it worth it? YES! It helped Illinois avoid a total disaster: this fiscal year, we would have been facing a $34 billion deficit had it not been enacted. This chart shows a comparison of the Accumulated Deficits with and without the Temporary tax increase of Our current tax system is simply inadequate.[In 2011 Without: $11.5 B deficit, With: $9.1 B deficitIn 2012 Without: $19 B deficit, With: $9 B deficitIn 2013 Without $25.8 B deficit, With: $8.3 B deficitIn 2014 Without: $34 B deficit, With: $8.9 B deficit]CTBAonline.org: Analysis of FY2014 Illinois General Fund Budget
13 What is the state of the state’s budget? HARD costs (e.g. debt service, pensioncontributions) $11.16BUnpaid bills which MUST be paid $8.3B$35.63B(revenue)$24.47B$16.17BAppropriated24.52B$0 B$-8.35BGeneral Fund BudgetK-16 Education Healthcare HumanServicesPublic SafetyOtherCTBAonline.org: Analysis of FY2014 Illinois General Fund Budget
19 Were these cuts justified? We fund education at $2500 LESS than adequate to give a basic education (2/3rds of students without special needs succeed)*Actually these cuts ARE a big deal. Each year, the Education Funding Advisory Board estimates the amount of money which would be required to provide a minimal level, basic education – funding which pays for a system that would permit 2/3rds of the students who are not at risk(at risk includes special needs as well as English as a Second Language) to succeed (meeting or exceeding standards).The EFAB “Foundation Level” has not been met by allocations from the state legislature since FY02[According to a CTBA analysis of January 2013 EFAB date:EFAB recommended for 2013: $8561; Budgeted: General State Aid (GSA): $6119; But the state has only been able to pay 89% of that, so Reality: $5734EFAB recommended for 2014: $8672. The governor has proposed that the actual Foundation Level should remain flat over the next 2 years.General State Aid has been prorated for the past two years, with payments at just 89 percent of the amount owed to districts this current year. As a result, the GSA foundation level of $6,119 per student can’t be met. If that statutory level had been lowered to an amount that appropriations could afford, it would have been set at $5,734.]* According to EFAB: Education Funding Advisory Board
21 Why is it a problem when local districts pay most of the cost for education? Property taxes account for 92.4 percent of inequality in local revenue between low- and high-poverty districts*The wealthiest districts are able to raise on average almost $5,000 more per pupil than the highest-poverty districts.* Baker & Corcoran, 2012, Center for American Progress
22 Education is Important to Illinois’ Prosperity Good Education attracts and keeps business in a state because:Businesses locate where there is a skilled and educated workforce;Employees want to be where they’ll find good schools for their children.Education is important to a state. It is a chief factor when businesses decide to move or stay in a location. (slide)
24 But Education now matters more than ever to economic prosperity because: Generally, unemployment rates are highest for those with the least education.The State of Working Illinois, Northern Illinois University 2008, Center for Governmental Studies and Office for Social Policy Research at NIU, with CTBA
29 Why are continued cuts to our priority services ineffective? For every $1 spent by the government,the economy gets back $1.36.=Investing in public services creates jobs for people who spend their income on goods & services. Cutting spending on public services creates job loss.*Mark Zandi, Chief Economist for Moody’sOn the other hand, for every dollar spent by the government the economy gets back $ For example, when the state funds mental health services, it enables people with mental health needs to continue or to return to work. Child care services enable more parents to find or remain employed. Conversely, cutting these services, as we see, negatively affects the private sector.
30 So if it isn’t spending . . . what IS the problem? So we see that spending for our core services has declined over the years, and we therefore suspect that spending, at least for these budgets is not the real problem.
31 Unfair Inflexible Inadequate Illinois Taxes are… We’ve seen this slide before. And this IS the major problem. So—where do we go from here? What are our choices?
33 How is a graduated rate calculated? (a fictional illustration)* $50,000$40,000$30,000$20,000$10,000$How is a graduated rate calculated? (a fictional illustration)*Average Tax: 4.6%(“effective rate”)8.8%6.6%When you cross into a higher bracket, only the income ABOVE that bracket's floor is subject to the higher rate, NOT one's entire income.(“marginal rate”)Taxable income4.4%2.2%1.1%There are some myths floating around about the GRIT. We need to know the facts about the GRIT. Some will say that everyone’s taxes will go up because they think the top bracket for a person’s income is the actual rate that person will pay. This is not true and this fictional illustration shows how a GRIT is calculated. (10,000 is taxed at 1.1%, the next 10,000 at 2.2%, and so forth. When these segments are calculated and added together the resulting tax owned is only 4.6% NOT 8.8%.) Further:the lower income person (someone making 10,000 will pay only 1.1%; someone making 20,000 pays 1.1% on the first 10,000 and 2.2% on the next 10,000. In other words, the higher the income, the higher the rates. BUT, in our example the effective rate for the person earning 50,000 is 4.6% NOT 8.8% . The reason why I am showing you a fictional illustration is that the constitutional amendment we hope to pass only gives Illinois the ability to have a graduated tax—the General Assembly would determine the rates and legislators will be listening carefully to their constituents!* For someone with a taxable income of $50,000
34 A Fairer Tax Contributes to the Economy Why?Lower and Middle income earners spendmost or all of their income for food, clothing, etc.Taxing them to a lesser degree would enable them tospend more and therefore stimulate the economy.Higher income earners and those with greaterwealth save a higher percentage of their income. Theirdiscretionary spending is relatively unchanged bymarginal tax increases or decreases.Another myth is that a GRIT will harm the economy. We believe this not to be true—and in fact putting more dollars into the hands of lower and middle income people would have a positive effect. Why? (Read slide) Then add: This is a win-win for all citizens, because we all benefit when our society prospers.
35 Increasing taxes does not kill jobs or cause people to flee the state Businesses come to or stay in a state because:They find a skilled workforceThey find the resources they needThey find good infrastructure.Property taxes are reasonablePeople leave a state:For employmentFor family reasons For retirementINCOME TAXES ARE NOT A BIG FACTOR!Two more myths are these: a GRIT will cause business and people to flee the state. The reality is this:
36 We Need to Create the Opportunity and Graduated Income Tax to Have a Fairand Graduated Income TaxBecause our constitution mandates a flat tax, we must take action!
37 Change Requires that a Constitutional Amendment be Placed on the Ballot by the Legislature: SJRCA 40 & HJRCA 33 (a) There may be one tax on the income of individuals andcorporations. This may be a fair tax where lower rates apply tolower income levels and higher rates apply to higher incomelevels. No government other than the State may impose a tax onor measured by income.A tax on or measured by income shall beat a non-graduated rate. At any one time there may be no morethan one such tax imposed by the State for State purposes onindividuals and one such tax so imposed on corporations. In anysuch tax imposed upon corporations the rate shall not exceedthe rate imposed on individuals by more than a ratio of 8 to 5.The General Assembly must pass these resolutions. The slide shows the substance of the resolution. The crossed out paragraph represents the current wording in the Constitution.
38 Timeline for Approving a Constitutional Amendment May 4, 2014: 60% of both houses of the General Assembly pass a bill calling for a referendum to be placed on the Nov. 4, 2014 general election (71 votes in the House and 36 votes in the Senate)Nov. 4, 2014: 60% of those voting on the referendum (or 50% of those voting in the election) approve the referendumAfter the voters give approval, the General Assembly may craft legislation, establishing a graduated rate income tax.Here is the action timeline.
39 What Can You Do?1.When talking to legislators, ask whether they are in favor of a graduated rate income tax. If not, why not?2. Go to lwvil.org and look for Graduated Rate Income Tax information, including links for a slide show, FAQs, talking points, letter to the editor templates.3. Keep an eye on editorials, articles, and letters to the editor about the graduated tax proposal. Write a personal letter in opposition to or support of the article, or alert your League president or the LWV IL to the article so it can be addressed.4. See if any other organizations you belong to would like to be educated on the issue. Please contact the League of Women Voters atCitizens have a role in making this change! (read slide) And, of course, if these resolutions make it onto the November ballot, VOTE—and encourage others to vote FOR a GRIT.
41 For resources and more information: League of Women Voters of IllinoisCenter for Tax and Budget AccountabilityA Better Illinois Coalition
42 “A Better Illinois” Coalition Members Access Living ~ Action Now ~ AFSCME Council 31 & Retirees ~ AIDS Foundation of Chicago ~ Anixter Center ~ Associated Firefighters of Illinois~ Bethel New Life ~ Better Funding for Better Schools ~ Bickerdike Redevelopment Corporation ~ Block Club Federation ~ Brighton Park Neighborhood Council ~ Center for Tax and Budget Accountability ~ Champaign County Health Care Consumers ~ Chicago Alliance Against Sexual Exploitation ~ Chicago Alliance to End Homelessness ~ Chicago Coalition for the Homeless ~ Chicago Coalition of Labor Union Women ~ Chicago Federation of Labor ~ Chicago Teachers Union ~ Chicago House and Social Service Agency ~ Chicago Jobs Council ~ Chicago Jobs with Justice ~ Chicago Legal Advocacy for Incarcerated Mothers ~ ChildServ ~ Citizen Action/Illinois ~ Coalition of Citizens with Disabilities in Illinois ~ Enlace Chicago ~ Erie Neighborhood House ~ Grassroots Collaborative ~ Heartland Alliance for Human Needs and Human Rights ~ Hesed House ~ Housing Action Illinois ~ Illinois African American Coalition for Prevention ~ Illinois AFL-CIO ~ Illinois Alliance for Retired Americans ~ Illinois Assistive Technology Project ~ Illinois Maternal and Child Health Coalition ~ Illinois Network of Centers for Independent Living ~ Illinois Public Health Association ~ In His Hands Youth Outreach ~ Independent Voter of Illinois/Independent Precinct Organization (IVI/IPO) ~ Joliet Childcare Resource and Referral ~ League of Women Voters of Illinois ~ Logan Square Neighborhood Association ~ Metro Tenants Organization ~ NAACP Peoria Chapter ~ Open Communities ~ Quad Cities Federation of Labor ~ Responsible Budget Coalition ~ Sargent Shriver National Center on Poverty Law ~ SEIU State Council & affiliated locals ~ South Austin Community Coalition Council ~ Southsiders Organized for Unity and Liberation (SOUL) ~ State University Annuitants Association ~ Steelworkers Organization of Active Retirees ~ Supporting Provider Network Association ~ Supportive Housing Providers Association ~ Women Employed ~ and growing!
43 “A Better Illinois” Supporters Civic Leaders For A Better Illinois Congressman William Enyart ~ Congressman Luis Gutierrez ~ Congresswoman Robin Kelly ~ Congresswoman Jan Schakowsky ~ Cook County Board President Toni Preckwinkle ~ Cook County Clerk David Orr ~ Cook County Commissioner Jesus Garcia ~ Cook County Commissioner Joan Murphy ~ Cook County Commissioner Edwin Reyes ~ Cook County Commissioner Deborah Sims ~ Cook County Commissioner Larry Suffredin ~ Chicago City Clerk Susana Mendoza ~ Chicago Alderman John Arena ~ Chicago Alderman Howard Brookins, Jr. ~ Chicago Alderman Walter Burnett, Jr. ~ Chicago Alderman Will Burns ~ Chicago Alderman James Cappleman ~ Chicago Alderman Michael Chandler ~ Chicago Alderman Jason Ervin ~ Jackie Kendall ~ Chicago Alderman Toni Foulkes ~ Chicago Alderman Deborah Graham ~ Chicago Alderman Natasha Holmes ~ Chicago Alderman Margaret Laurino ~ Chicago Alderman Roberto Maldonado ~ Chicago Alderman Joe Moore ~ Chicago Alderman Ricardo Munoz ~ Chicago Alderman Ameya Pawar ~ Chicago Alderman Roderick Sawyer ~ Chicago Alderman Debra Silverstein ~ Chicago Alderman Nicholas Sposato ~ Chicago Alderman Scott Waguespack ~ Sen. Art Berman ~ Rep. Paul Froelich ~ Lauren Beth Gash ~ Democratic Committeewoman Carol Ronen ~ Park Forest Mayor Roy Ostenburg ~ Bloom Township Trustee Kevin Watson ~ Rock Island City Councilor Brian Vyncke ~ Rock Island City Councilor Jeffrey Stulis ~ Silvis Mayor Tom Conrad ~ Silvis City Councillor Caryn Unsicker ~ Silvis City Councillor Kathy Hall ~ Jane Ramsey ~ Will County Board Member Jackie Traynere ~ Betsy Lassar ~ Ann Dempsey, President Greater Rockford League of Women Voters ~ and growing!
44 “A Better Illinois” Supporters Small Businesses For A Better Illinois Coco Soodek, Profit and Laws, Inc. ~ Alex’s Auto Body & Repair ~ Bergstein’s New York Delicatessen ~ Bloodshot Records ~ Chicago Press ~ Colvin’s Printing ~ Edward Ark Collections, Inc. ~ Ekonomisk Management ~ David Borris, Hel’s Kitchen Catering ~ Holistic Health Care ~ Hedy Ratner ~ Lincoln Park Chamber of Commerce ~ Karen Miller, Eberhart Accounting Services ~ MyBestRx ~ Nina Gapshis, Progress Printers, ~ Randall Talcott, Three Oaks Advisors, LLC ~ Kevin Wilder, Wilder Inc. ~ Joshua Cynamon, Vantage Insights LLC ~ Steven Gross, Steven Gross Inc. ~ T and A Transportation ~ Thomas Franklin, Thomas H Franklin & Associates, LLC ~ VJ Ware Transportation, Inc ~ Marla Wilson, Advertising Specialty Creations ~ and growing!Faith Leaders for A Better Illinois Rev. Jerome Adams, Lighthouse Church of Chicago ~ ARISE Chicago ~ Rev. Alexander Ballok Jr., St. John’s UCC ~ Rev. Frances Bates, Community Protestant ~ Herb Best, Congregational Church of Christ ~ Rev. Erik Christensen, St. Luke’s Lutheran Church of Logan Square ~ Community Renewal Society ~ Rev. Clint Collins, St. Peter Community Church ~ Rev. Susan Detterman, Community Congregational UCC ~ Rev. Donald Farley, St. Paul’s UCC ~ Rev. Jason Coulter, Ravenswood United Church of Christ ~ Rev. Chris Fox, First Congregational UCC ~ Rev. Dr. Terrence Gallagher, New England UCC ~ Rev. Franklin Gamwell, Presbytery ~ Paul Henning, Ravenswood Presbyterian Church ~ Rev. Janet Hisbon, Faith Community UCC ~ Rev. John Holm, Joy! Lutheran Church ~ Rev. Michael Hoye ~ Rev. Jan Johnson, St. John UCC ~ Rev. Kristian Johnson, Pilgrim Lutheran Church ~ Jewish Council on Urban Affairs ~ Rev. David Inglis, First Congregational Church UCC ~ Rev. Kevin McLemore, Epiphany United Church of Christ ~ Conference Minister Jorge Morales, IL Conference UCC ~ Rev. Rev. Nancy Pfaltzgraf ~ Dr. Rex Piercy, Congregational UCC ~ Jonathan Knight, Fox Valley Association ~ Northern Illinois Conference of the United Methodist Church ~ Project IRENE ~ Rainbow PUSH Coalition ~ Rev. Dr. Ann Roswell, First Congregational Church UCC ~ Pastor Mark Schol, Grace United Methodist Church of Logan Square ~ Rev. Kara Wagner Sherer, St. Johns Episcopal Church ~ Rev. Sally Sheib, Bethel United Church of Christ ~ Rev. Arthur Stratemeyer. Plainfield Congregational UCC ~ Pastor Anthony Sullivan, God Can Ministries UCC ~ Unitarian Universalists for Social Justice ~ Rev. Booker Vance, SOUL ~ Rev. Gene Winkler ~ Rev. Mark Winters, First Congregational UCC Naperville ~ Rev. Wendy Witt ~ Rev. Tim Yeager ~ and growing!
45 “A Better Illinois” Supporters Educators For A Better Illinois Illinois Action for Children ~ Voices for Illinois Children ~ ABC 123 Daycare, Inc. ~ Bottles Diapers ‘n’ Pins ~ Common Sense Coalition of LSCs for Fair Funding ~ ~ Decatur School Board Member Fred Spannaus ~ Decatur School Board Member Alida Graham ~ Dot's Daycare ~ Forchias Little Angels ~ Foundation Daycare ~ God’s Little Lambs Home Daycare ~ Grannie’s Babies Daycare ~ Hayes Home Daycare ~ Heaven on Earth Childcare ~ Heavens Angels Daycare ~ Home for Tots Daycare ~ Honey Bees House of Learning, Inc. ~ House of Kids Childcare And Learning Center ~ Illinois Education Association ~ Illinois Federation of Teachers ~ Illinois Federation of Community Schools ~ Judy's Daycare ~ Jump Smart Family Child Care ~ Kiddios Academy ~ Little Ladies and Gents Home Daycare ~ Mary's Little Lamb Home Daycare ~ Jack Metzgar, Emeritus Professor of Humanities Roosevelt University ~ Pat’s Home Day Care, Inc. ~ Raise Your Hand Coalition ~ Renee's Rainbow Daycare and Development ~ Shelbyville School Board Member Rob Bosgraaf ~ David Bon- nette, Retired Superintendent of Riverside School District 96 ~ Patrick Patt, Retired Superintendent of Oak Grove School District 68 ~ David May, President Lagrange School District 102 ~ Jack Metzger ~ Marleis Trover, Chair, Education Leadership Department, Eastern Illinois University ~ Scribbles Daycare Inc. ~ Sherae's Little Angels Daycare ~ Taras Day Camp ~ The Babies Club ~ The Giving Tree Home Daycare ~ TJs Heavenly Angels Daycare ~ We are the World Home Daycare ~ Weezie Breezies Daycare, Inc. ~ and growing!