When an Illinois legislator tries to “win” a tax, guess who loses?
We hear a lot about companies leaving Illinois. But solving the problems that push them to leave? Not really.
There is an urgent need to address the issues that are forcing business owners to make the difficult decision to leave. State leaders need to understand that their job is to make sure employers who want to stay and invest in Illinois can do so. Besides its uncertain fiscal and economic climate, Illinois is a great place to do business thanks to an educated workforce and Chicago’s position as a Midwestern hub.
So it’s disturbing to hear state lawmakers again pushing failed policy ideas like the progressive income tax, which voters have made clear they don’t want in 2020. It would certainly worsen our business climate. .
In early February, Illinois State Senator Robert Martwick, D-Chicago, again introduced a bill trying to establish a progressive income tax structure in Illinois. His plan would create eight brackets that would tax income from 4% to 6.95%.
“If you really believe in something, you don’t give up after a loss,” Martwick said. “That’s what you should do.”
Entrepreneurs have already said ‘no’ to the so-called ‘fair’ tax. They came out against it — in one case, despite pressure from Governor JB Pritzker. But Martwick is insisting on resurrecting the progressive tax campaign, giving voters more of what they’ve already said they don’t want.
Illinois voters did not trust state politicians with taxing power that would have allowed lawmakers to change rates at any time. The mistrust is justified: In the past 34 years, Illinois politicians have twice imposed “temporary” income tax hikes. Both times they became permanent, and both times failed to fix state finances, pay off pension debt, or control property taxes.
Higher taxes on businesses mean less funding to create jobs, hire employees and grow. Moreover, the costs are simply passed on to consumers. Experts, from Nobel laureates to former presidents of the Council of Economic Advisers, have said that rising taxes are hurting economic growth. Higher marginal tax rates reduce small business employment, employee wages and growth.
Martwick and other proponents of progressive taxation should know this. As a spokesman for Illinois Senate President Don Harmon said after the president met with Martwick to discuss the possibility of returning a graduated ballot tax: “The idea – the policy – is one that the President of the Senate has supported for a long time. At the same time, we have all seen the results and the message sent by the voters.”
Some Illinois senators understood this and sponsored a resolution opposing a progressive income tax. They offer hope that Illinois politicians’ habit of not listening to business owners’ concerns can be changed — and that perhaps, instead of more taxes, Illinois will implement real solutions that will solve the long-term problems of the state.
Fortunately, the policy solutions Illinois really needs aren’t a mystery. All it takes is for legislators to be willing to act rather than rely on wishful thinking.
The problem: Illinois owes $140 billion in state pension debt as of fiscal year 2022, and local governments owe about $70 billion. This retirement debt propelled Illinois’ property taxes to second highest in the United States.
The solution: Lawmakers should let the people vote to amend the state constitution so that the rate of growth of future retirement benefits stops spinning out of control, destroying state finances and departments and the wallets of Illinois.
Lawmakers have twice asked voters in recent years to change the Illinois Constitution in ways that hurt taxpayers and the state’s economy. It’s time to let them vote on a pensions amendment that could pave the way for future reforms without hurting existing benefits, has popular support and passed with bipartisan backing when lawmakers tried to implement it ten years ago.
Illinois needs economic progress. A better business climate will achieve this. Dwell on an ineffective plan that voters rejected? Again, not so much.
• Matt Paprocki is president and CEO of the Illinois Policy Institute, a Chicago-based think tank that promotes smaller government and free market principles.