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© 2013, Center for Tax and Budget Accountability The Case for a Fair and Graduated Income Tax League of Women Voters of Illinois.

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Presentation on theme: "© 2013, Center for Tax and Budget Accountability The Case for a Fair and Graduated Income Tax League of Women Voters of Illinois."— Presentation transcript:

1 © 2013, Center for Tax and Budget Accountability The Case for a Fair and Graduated Income Tax League of Women Voters of Illinois

2 First We Should Acknowledge "Taxes are the price we pay for civilization.“ ----Justice Oliver Wendell Holmes, Jr.

3 A Fair and Graduated Tax Could…

4 Illinois Taxes are… Unfair Inflexible Inadequate

5 Unfair because the Top 1% Pay a Smaller Percentage of their Income in Total State and Local Taxes than the Bottom 20%

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 2012...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 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 growing Our tax system overlooks the fastest growing part of its economy – services - and continues to focus on consumer goods and manufacturing Illinois taxes are inflexible because…

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, 2/28/2012

9 Illinois taxes are inadequate because... Illinois has a Structural Deficit © 2012, Center for Tax and Budget Accountability

10

11 Was the Temporary Tax Increase Worth It?

12 FY2014 Accumulated Deficit ($ Billions) Source: Appropriations from and FY2014 CTBA analysis SB 2555, SB 2556, HB 206, HB 208, HB 213, HB 214, HB 215, passed by the 98 th General Assembly; and hard costs from FY2014 GOMB Budget Book. *This is the 23 rd consecutive fiscal year with a General Fund deficit* CategoryGOMB RevenueHJR-17 Revenue (i)Projected FY2014 Revenue$35.63$35.08 (ii)Projected FY2014 Hard Costs$11.16 (iii) Projected Deficit Carry Forward from FY2014 $8.3 (iv) Projected Net FY2014 General Fund Revenue Available for Services $16.17$15.62 (v) Projected Net General Fund Service Appropriations $24.52 (vi) Estimated Minimum FY2014 General Fund Deficit ($8.35)($8.9) (vii) Estimated Deficit as a Percentage of General Fund Service Appropriations -34.05%-36.29% September 6, 2013 © 2013, Center for Tax and Budget Accountability

13 What is the state of the state’s budget? HARD costs (e.g. debt service, pension contributions) $11.16B Unpaid bills which MUST be paid $8.3B

14 Over $9 out of $10 of our General Fund budget are spent on: © 2012, Center for Tax and Budget Accountability Education (PreK-12 plus Higher Ed)35% Healthcare30% Human Services21% Public Safety 5% 91%

15 Are we overspending on our four core services?

16 We’ve actually been cutting since 2000 (Adjusted for Inflation and Population Growth) © 2013, Center for Tax and Budget Accountability CategoryFY2014 GOMB FY2000, Enacted Adj for Infl (ECI) & Pop Growth $ Diff FY2013 – FY2000 Adj (ECI & Pop Growth) % Change PreK-12 $6,686$7,491-$805 Higher Ed $1,991$3,328-$1,337 -40.2% Healthcare (excluding Group Health) $7,171$8,911-$1,740 -19.5% Human Services (excluding all Healthcare) $4,995$7,112-$2,118 -29.8% Public Safety $1,648$2,088-$440 -21.1% Net Public Services excluding Pensions and Group Health $23,177$32,173-$8,996 Sources: FY 2013 Budget as passed in HR 706, SB2348, SB2413, SB2443, SB 2454, SB2474, SB 2332, SB2378, SB2409, and June 2012 Communications with Legislative staff.

17 Let’s take a closer look at education

18 Since 2000, P-12 has been cut over 10% and Higher Ed a staggering 40% © 2012, Center for Tax and Budget Accountability CategoryFY2013 Enacted FY2000, Enacted Adj for Infl (ECI) & Pop Growth $ Diff FY2013 – FY2000 Adj (ECI & Pop Growth) % Change PreK-12 $6,686$7,491-$805 Higher Ed$1,991$3,328-$1,337-40.2%

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)*

20 Illinois Ranks #50 in state percentage spending for education © 2013, Center for Tax and Budget Accountability Source: National Center on Education Statistics, 2011. “Revenues and Expenditures for Public Elementary and Secondary Education: School Year 2008-2009 (Fiscal Year 2009).”

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.

23 $% Less than High School-$4.77-32.8% High School-$2.39-15.5% Some College-$1.86-11.3% Associate’s or More$2.8413% All Workers-$0.35-2.1% GOTTA LEARN TO EARN! Change in Hourly Median Wage by Education Attainment, 1979-2010 (in real, 2010$) © 2013, Center for Tax and Budget Accountability

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

25 Let’s now look at human services

26 Human Services: Serves the Most Vulnerable Citizens of Illinois © 2013, Center for Tax and Budget Accountability Mental Health Services Developmental Disabilities Caring for Seniors Childcare for Single Working Parents Domestic Violence Prevention/ Treatment Caring for Abused and Neglected Children Substance Abuse and Alcoholism Services Human services has been cut 29.8% since FY2000

27 Illinois continues to cut funding for critical human services: © 2013, Center for Tax and Budget Accountability CategoryFY2014 GOMB FY2000, Enacted Adj for Infl (ECI) & Pop Growth $ Diff FY2013 – FY2000 Adj (ECI & Pop Growth) % Change Human Services (excluding all Healthcare) $4,995$7,112-$2,118-29.8% With a growing senior population and in a time of economic hardship, our human services needs have gone up.

28 Hurting the private sector economy with cuts © 2013, Center for Tax and Budget Accountability

29 Why are continued cuts to our priority services ineffective?

30 So if it isn’t spending... what IS the problem?

31 Illinois Taxes are… Unfair Inflexible Inadequate

32 What are our Choices? © 2012, Center for Tax and Budget Accountability Borrowing from financial institutions to pay overdue bills and cover operating costs Continued deferment of payments owed providers Further cutting appropriations for services Raising Revenue:  Increase the Flat Tax: (Which Raises Taxes on Everybody Including Middle and Lower Income Families)  A FAIR and GRADUATED RATE INCOME TAX.

33 How is a graduated rate calculated? (a fictional illustration)*

34 A Fairer Tax Contributes to the Economy Why?  Lower and Middle income earners spend most or all of their income for food, clothing, etc. Taxing them to a lesser degree would enable them to spend more and therefore stimulate the economy.  Higher income earners and those with greater wealth save a higher percentage of their income. Their discretionary spending is relatively unchanged by marginal tax increases or decreases.

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 workforce They find the resources they need They find good infrastructure. Property taxes are reasonable People leave a state: For employment For family reasons For retirement INCOME TAXES ARE NOT A BIG FACTOR!

36

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 and corporations. This may be a fair tax where lower rates apply to lower income levels and higher rates apply to higher income levels. No government other than the State may impose a tax on or measured by income. A tax on or measured by income shall be at a non-graduated rate. At any one time there may be no more than one such tax imposed by the State for State purposes on individuals and one such tax so imposed on corporations. In any such tax imposed upon corporations the rate shall not exceed the rate imposed on individuals by more than a ratio of 8 to 5.

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 referendum After the voters give approval, the General Assembly may craft legislation, establishing a graduated rate income tax.

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 (issues@lwvil.org) 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 at issues@lwvil.org.

40 5 “take-away” points © 2013, Center for Tax and Budget Accountability Spending alone did not cause the deficit problem. Illinois cannot fix its problem with cuts ALONE. Illinois residents should be taxed fairly to keep up with a modern economy. A graduated income tax will NOT hurt the economy but will actually help it. The problem can be solved with comprehensive tax reform.

41 For resources and more information: League of Women Voters of Illinois http://www.lwvil.org/grit-project.html Center for Tax and Budget Accountability www.ctbaonline.org A Better Illinois Coalition www.abetterillinois.org

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!


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