Transcript True GRIT* Comes from

Tax Facts: How to address
Illinois’ budget deficit
WITHOUT cutting spending to
education and other basic human
services
What is the state of the state’s budget?
$16.17B
Unpaid bills which MUST be paid
General Fund Budget
K-16 Education
0B
Healthcare
Human
Services
-8.35B.
CTBAonline.org: Analysis of FY2014 Illinois General Fund Budget
Other
$24.47B
HARD costs (e.g. pension payments, debt owed
to bond holders)
Public Safety
$35.63B
Was the Temporary Tax
Increase Worth It?
0
-5
-10
-15
No Tax Inc.
-20
With Tax Inc.
-25
-30
-35
-40
2011
2012
2013
2014
CTBAonline.org: Analysis of FY2014 Illinois General Fund Budget
What caused the state’s budget deficit?
1. Flawed Tax Policy
* overtaxing our main consumers –
the poor and middle class
* while refusing to raise taxes on the higher
income earners
2. Irresponsible Fiscal practices
* misusing funds intended to pay pensions
* cutting spending in basic human services
3. The “Great Recession” of ‘08-’09
What’s flawed about the
current tax policy in
Illinois?
Families earning less than $57,000
pay 10.9% in taxes* in Illinois
Families earning $445,000 or more
only pay 4.9% in taxes in Illinois
*Taxes: Sales and Excise, property, and
income taxes after federal deduction offset
Institute on Taxation and Economic Policy, 2013
How would it help business if people who
earn less paid less for taxes?
Middle income earners
spend most or all of
their income for food,
clothing, etc., giving it
back to the economy.
Upper income earners
save much of their
income
Example
• Remember those checks we got from the
2008 stimulus (aka the Bush rebate)?
Parents - professionals
who put it in the bank
Their 25-year-old son
used it for muchneeded car repairs
Which taxation focus is more
responsive to the economy?
Does it make sense to rely on taxing
salaries of middle income families, which
have been flat or declining in real terms over
time…
OR
Does it make more sense to focus on the
sector where the economy is growing?
Top income earners have collectively
received all real income growth in the nation
since 1973
Even with the temporary tax hike, Illinois
taxes personal income at a low level
Increasing taxes does not kill Jobs
• The 2 states with the lowest taxes in the Mid West
(IL and MO) also had the lowest GDP growth during
2010 (1st year of recovery post recession)*
• In 2011, Young and Varner
– Ties to family, friends and career outweighed a higher
personal income tax rate
– Following a 2004 tax increase in New Jersey,
• Revenue gain from tax increase: $3.77B
• Loss of revenue from exit of people earning over
$500,000: $16.4 M: .004 of the gain
* CTBA: Illinois FY2013 General Fund Budget Analysis
Having a structural deficit
means NOT investing in
Transit
Infrastructure
Education
But all of these attract
and keep businesses!
Fiscal Irresponsibility –
underfunding human services
Changes in costs of Core Services
Adjusting for inflation, our
state is already spending
over 28% LESS on
Human services today
than in 2000
20.0%
15.5%
15.0%
10.0%
5.0%
0.0%
-5.0%
-10.0%
-15.0%
-20.0%
-25.0%
-
-30.0%
StateState
spending
Spending
increase
in
Increase
(Nominal
nominalDollars)
dollars
CTBAonline.org: Analysis of FY2014 Illinois General Fund Budget
28%
State Spending
.9%
increase after
adjusting for the
ECI and Population
Grown
Most of the money spent on core services
pays for salaries for labor-intensive jobs
Spending cuts have KILLED JOBS in Illinois
Many jobs in health
and safety, education,
and other human
services have been
lost over the past 12
years.
Why are these jobs so labor intensive?
The Human Services provide 1 on 1 help
addressing
•
•
•
•
Mental Health Services
Developmental Disabilities
Substance Abuse and Alcoholism Services
Rehabilitative Services helping Developmentally
Disabled residents live as independently as possible
• Childcare assistance for low-income working mothers
• Family and Community Services- Includes SNAP, WIC,
and cash assistance
© 2012, Center for Tax and Budget Accountability
Effect of Job Cuts on
Dept. of Human Services
• Some workers now have caseloads of
more than 1000 people!
http://illinoisissuesblog.blogspot.com/2013/04/dhs-bogged-down-by-bigcaseloads.html
Why is it irresponsible to cut
spending in core human services?
For every $1 spent on
core public services
The economy gets back $1.36!
-Zandi*
Because investing in public services creates
jobs for people who spend their income on
goods & services.
*Chief Economist for Moody’s
Fiscal Irresponsibility
Example: Under funding education
We fund education at $2500
LESS than adequate to
give a basic education
(2/3rds of students without
special needs succeed)*
* According to EFAB: Education Funding Advisory Board
Since 2009, Cuts in Education Funding
have caused…
• Loss of 6400 full time teacher and aid positions*
– Crowded classrooms
* Illinois State Board of Education, March, 2013
Spending cuts since 2009:
• Transportation cuts:
Children in some districts can spend up to 2
hours on a bus getting to and from school.
* Illinois State Board of Education, March, 2013
Spending cuts since 2009
• 18,000 preschoolers deprived of early
childhood education*
* Illinois State Board of Education, March, 2013
Funding of Education varies by state
• Average state funding
• In Illinois
Federal
State
Federal
State
Property tax
Property
tax
Illinois already ranks 50th among the states in
the amount of educational funding provided by
the state.
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 highpoverty districts*
• The wealthiest districts are able to raise on average
almost $5,000 more per pupil than the highestpoverty districts.
* Baker & Corcoran, 2012, Center for American Progress
How poorly-funded education is a harmful cycle
Poorly-funded schools
have less qualified
teachers, worse materials
& equipment, & out-of date
curriculum
Citizens with the greatest
wage loss live in poorer
neighborhoods & their
children go to poorlyfunded schools.
© 2012, Center for Tax and Budget Accountability
Inadequate education
is related to poor
lifestyle choicessmoking, teen
pregnancy, dropping
out,
etc.
Between 1980 & 2006,
people with the least
amount of education
experienced the greatest
wage loss
Effects of underfunding schools:
Cost to Society of Dropouts
If ½ of high school dropouts
in their 20’s finished school,
the government would reap
$45 billion in
* extra tax revenues
&
* reduced costs of
public health,
crime and justice
welfare payments
Levin, H., Belfield, C., Muennig, P., & Rouse, C. (January, 2007).
There is no logic for
under funding human services
We live in one of the Wealthiest States!
• Illinois’ Annual Economy of $650 Billion
exceeds the economies of
Belgium & Sweden! *
* The Economist Online
The People Agree…
Illinois has a REVENUE problem –
Not a spending problem
According to a
statewide poll
conducted by the
Paul Simon Public
Policy Institute
66% of Illinois voters
endorse increasing income
taxes on higher income.
earners
We need a constitutional amendment for
a Fairer Income Tax
According to Adam Smith, “the father of modern
capitalism”
"The subjects of every state ought to contribute
toward the support of the government, as nearly as
possible, in proportion to their respective abilities;
that is, in proportion to the revenue which they
respectively enjoy under the protection of the
state.”
This is what a fairer tax looks
like in Iowa
• Iowa: 9 Rates (0.36% to 8.98%)
If we had Iowa’s rates we
would have $6.8 Billion more
in revenue and 56% of
Illinoisans would pay lower
taxes
How is a graduated rate calculated?
Hypothetical example*
$50,000
Taxable income
$40,000
8.8%
6.6%
$30,000
4.4%
$20,000
2.2%
Average Tax: 4.6%
$10,000
1.1%
$
0
* For someone with a taxable income of $50,000
Please help us!
Tell your legislators that we need a vote on
a constitutional amendment for a Fairer
Income Tax on the
November, 2014 Ballot
Change Requires Constitutional
Amendment Placed on
Ballot by Legislature
HJRCA 33 and SJRCA 40:
lower rates apply to lower income levels
&
higher rates apply to higher income levels.
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., 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
• Following that, legislation setting the rates
then needs to be passed by GA.
For More Information:
• League of Women Voters of Illinois
www.lwvil.org/GRITProject.asp
[email protected]
• Center for Tax and Budget Accountability
www.ctbaonline.org