RE: Re: State Income Tax Increase

[Guest guest]

Folks, a few weeks ago I tried to capture info from the Center on Tax and Budget

Accountability into some dot points. It makes fascinating reading.

God only knows I don’t want to pay more taxes. But, we are in such dire

straits in Illinois that if they had not been increased, it would be EXISTING

services that disappear, not to mention the 22,000 people on PUNS ever receiving

services, or the fact that rates for current services are hugely inadequate. At

least now we have a fighting chance.

The dot points below are my “reduction†of their literature. However, I

didn’t not edit for content just length. You should check out their website to

backcheck me : - ).

Charlotte

_____

Highlights from the Center for Tax and Budget Accountability:

FUNDING OUR FUTURE, Reforming Illinois Tax Policy

http://www.ctbaonline.org/

<http://www.ctbaonline.org/New_Folder/Budget,%20Tax%20and%20Revenue/FINAL%20Fund\

ing%20Our%20Future-CTBA%20Report%2010.29.2010.pdf>

· Illinois now ranks as the state with the greatest rate of late

payments to human service providers in the nation.

· Illinois has run consistent General Fund deficits since FY1991

· Illinois is a comparatively low spending state overall, and has

actually been cutting spending in real, inflation-adjusted terms over the last

15 years.

· At the beginning of FY2011, the current fiscal year Illinois needed

over $40 billion in total General Fund revenue to cover:

o bills remaining unpaid from FY2010 ($6.0 billion);

o repayment of debt ($4.61 billion);

o contributions to the five state pension systems ($3.52 billion);

o and the $26.32 billion initially appropriated to be spent on the four core

public services.

· It is estimated that FY2011 General Fund recurring revenues will

total just $26.56 billion. This created an initial operating deficit of $13.89

billion, or 52.8 percent of the FY2011 General Fund.

· To reduce the FY2011 deficit, in July 2010, the governor cut $1.42

billion from the initial $26.32 billion appropriated to the FY2011 General Fund,

and the General Assembly and Governor identified another $3 billion in one-time

revenues for FY2011, thereby cutting the deficit from $13.89 billion to $9.47

billion. This new operating deficit represents 38 percent of the $24.9 billion

in FY2011 appropriations for core services that remain after the July 2010

spending cuts.

· Illinois state government spending is low overall.

· Since Illinois ranks 13th among the states in per capita income,

Illinois would be an “average†state in spending on a public service

relative to its capacity if it ranked 13th among the states in per-capita

spending on that service. To elevate its per-capita spending to average, in

FY2008 Illinois would have had to have increased education spending by $2.89

billion, human services spending by $387 million and Medicaid expenditures by

$1.2 billion.

· In addition to being low spending overall, Illinois has been cutting

General Fund spending in real terms over time.

· State General Fund spending on the four, core services has been cut

even more over the last decade.

· Illinois is also a low public employee head count state, ranking 49th

in the number of state workers per capita according to U.S. Census data.

· Growth in spending on Medicaid is not crowding out other General Fund

Expenditures. Almost 70 percent (68.7%) of the state’s increased Medicaid

expenditures came in the form of federal matching dollars.

· The backloading of costs in the Pension Ramp creates significant

pressure on the General Fund. By FY2010, the state's pension payment was fully

392.2 percent greater than it was in FY1995—showing both a big increase in

effort by the state to pay its bills, and why the Pension Ramp contributes

materially to the state’s ongoing General Fund deficits.

· Illinois is a low tax state -- Illinois ranks 44th in total state and

local tax burden as a percentage of income.

· Considering state tax levels in isolation, Illinois is tied with

Missouri for the second lowest state-only tax burden as a percentage of income

in the entire Midwest.

· Since 1990, Illinois has significantly lagged the nation in real GDP

growth, despite being having a lower, comprehensive state and local tax burden

than all but six states.

· Illinois’ flawed tax policy is the primary cause of the state's

ongoing General Fund deficits.

· Illinois substantially fails to satisfy each of the four principles

needed for good tax policy—i.e. that taxes be: fair, responsive, stable and

efficient.

· Illinois, the state with the fifth largest population, fifth largest

economy and 13th highest per capita income of any state, ranks 43rd in spending

on the core, four services of education, healthcare, human services and public

safety, that collectively constitute over 90 percent of the state’s General

Fund expenditures.

· Illinois’ low state level funding for education has shifted the

primary responsibility for school funding from state revenues to local property

tax revenues, resulting in one of the most inequitable education funding systems

in the nation.

· Despite being low tax and low spending, Illinois has cut its General

Fund by more than $1.4 billion in the current Fiscal Year.

Recommendations:

Taking the preceding factors into account, it is clear Illinois cannot get its

fiscal house in order without increasing recurring tax revenue through

comprehensive tax policy reform. This tax reform should include the following

elements:

· The Illinois individual income tax rate should be increased from 3%

to 5%, with a corresponding increase in the corporate income tax rate from 4.8%

to 8%. The state should also make the retirement income for tax filers with over

$50,000 in Adjusted Gross Income subject to the state’s personal income tax.

This will only affect 18.48 percent of Illinois tax filers who report having

retirement income.

· The Illinois sales tax base should be expanded to include virtually

all consumer services (other than medical and housing services).

· Any net tax should be at least partially offset with tax relief

specifically targeted to low and middle income taxpayers.

· The state's reliance on property taxes to fund schools should be

reduced, by using a portion of the new state-based revenues from the income and

sales tax changes to enhance education funding.

· Given the significant size of the current FY 2011 deficit – at

least $9.47 billion – any education funding enhancement should be phased in

over time, as the state’s deficit problems are resolved.

· The tax policy reform recommendations identified in this study will:

raise a net of $7.8 billion in new recurring General Fund tax revenue (after

netting out the $1 billion plus tax relief it provides to low and middle income

families and the $493 million in property tax relief it provides to homeowners);

eliminate the structural deficit; enhance education funding; and maintain total

state and local tax burden in Illinois in the bottom half of the nation.

[Guest guest]

I serve on the Illinois Council on Developmental Disabilities. It also has

members and attendees from state agencies. The governor's budget person for

human services was at yesterday's meetings. He said he's just started digesting

the 150-page tax increase legislation, so no planning yet on expenditures.

HOWEVER, earlier he had said that a tax increase will not result in any new

services, only, at best, prevent more cuts. The new revenue, as we know, will

start to dig us out of the financial mess Charlotte's described.

Keep advocating.

Bonnie Dohogne

________________________________

From: Charlotte Cronin <fsn@...>

IPADDUnite

Sent: Fri, January 14, 2011 11:59:14 AM

Subject: RE: Re: State Income Tax Increase

Folks, a few weeks ago I tried to capture info from the Center on Tax and Budget

Accountability into some dot points. It makes fascinating reading.

God only knows I don’t want to pay more taxes. But, we are in such dire

straits

in Illinois that if they had not been increased, it would be EXISTING services

that disappear, not to mention the 22,000 people on PUNS ever receiving

services, or the fact that rates for current services are hugely inadequate. At

least now we have a fighting chance.

The dot points below are my “reduction†of their literature. However, I

didn’t

not edit for content just length. You should check out their website to

backcheck me : - ).

Charlotte

_____

Highlights from the Center for Tax and Budget Accountability:

FUNDING OUR FUTURE, Reforming Illinois Tax Policy

http://www.ctbaonline.org/

<http://www.ctbaonline.org/New_Folder/Budget,%20Tax%20and%20Revenue/FINAL%20Fund\

ing%20Our%20Future-CTBA%20Report%2010.29.2010.pdf>

· Illinois now ranks as the state with the greatest rate of late

payments to human service providers in the nation.

· Illinois has run consistent General Fund deficits since FY1991

· Illinois is a comparatively low spending state overall, and has

actually been cutting spending in real, inflation-adjusted terms over the last

15 years.

· At the beginning of FY2011, the current fiscal year Illinois needed

over $40 billion in total General Fund revenue to cover:

o bills remaining unpaid from FY2010 ($6.0 billion);

o repayment of debt ($4.61 billion);

o contributions to the five state pension systems ($3.52 billion);

o and the $26.32 billion initially appropriated to be spent on the four core

public services.

· It is estimated that FY2011 General Fund recurring revenues will

total

just $26.56 billion. This created an initial operating deficit of $13.89

billion, or 52.8 percent of the FY2011 General Fund.

· To reduce the FY2011 deficit, in July 2010, the governor cut $1.42

billion from the initial $26.32 billion appropriated to the FY2011 General Fund,

and the General Assembly and Governor identified another $3 billion in one-time

revenues for FY2011, thereby cutting the deficit from $13.89 billion to $9.47

billion. This new operating deficit represents 38 percent of the $24.9 billion

in FY2011 appropriations for core services that remain after the July 2010

spending cuts.

· Illinois state government spending is low overall.

· Since Illinois ranks 13th among the states in per capita income,

Illinois would be an “average†state in spending on a public service

relative to

its capacity if it ranked 13th among the states in per-capita spending on that

service. To elevate its per-capita spending to average, in FY2008 Illinois would

have had to have increased education spending by $2.89 billion, human services

spending by $387 million and Medicaid expenditures by $1.2 billion.

· In addition to being low spending overall, Illinois has been cutting

General Fund spending in real terms over time.

· State General Fund spending on the four, core services has been cut

even more over the last decade.

· Illinois is also a low public employee head count state, ranking 49th

in the number of state workers per capita according to U.S. Census data.

· Growth in spending on Medicaid is not crowding out other General Fund

Expenditures. Almost 70 percent (68.7%) of the state’s increased Medicaid

expenditures came in the form of federal matching dollars.

· The backloading of costs in the Pension Ramp creates significant

pressure on the General Fund. By FY2010, the state's pension payment was fully

392.2 percent greater than it was in FY1995—showing both a big increase in

effort by the state to pay its bills, and why the Pension Ramp contributes

materially to the state’s ongoing General Fund deficits.

· Illinois is a low tax state -- Illinois ranks 44th in total state and

local tax burden as a percentage of income.

· Considering state tax levels in isolation, Illinois is tied with

Missouri for the second lowest state-only tax burden as a percentage of income

in the entire Midwest.

· Since 1990, Illinois has significantly lagged the nation in real GDP

growth, despite being having a lower, comprehensive state and local tax burden

than all but six states.

· Illinois’ flawed tax policy is the primary cause of the state's

ongoing General Fund deficits.

· Illinois substantially fails to satisfy each of the four principles

needed for good tax policy—i.e. that taxes be: fair, responsive, stable and

efficient.

· Illinois, the state with the fifth largest population, fifth largest

economy and 13th highest per capita income of any state, ranks 43rd in spending

on the core, four services of education, healthcare, human services and public

safety, that collectively constitute over 90 percent of the state’s General

Fund

expenditures.

· Illinois’ low state level funding for education has shifted the

primary responsibility for school funding from state revenues to local property

tax revenues, resulting in one of the most inequitable education funding systems

in the nation.

· Despite being low tax and low spending, Illinois has cut its General

Fund by more than $1.4 billion in the current Fiscal Year.

Recommendations:

Taking the preceding factors into account, it is clear Illinois cannot get its

fiscal house in order without increasing recurring tax revenue through

comprehensive tax policy reform. This tax reform should include the following

elements:

· The Illinois individual income tax rate should be increased from 3%

to

5%, with a corresponding increase in the corporate income tax rate from 4.8% to

8%. The state should also make the retirement income for tax filers with over

$50,000 in Adjusted Gross Income subject to the state’s personal income tax.

This will only affect 18.48 percent of Illinois tax filers who report having

retirement income.

· The Illinois sales tax base should be expanded to include virtually

all consumer services (other than medical and housing services).

· Any net tax should be at least partially offset with tax relief

specifically targeted to low and middle income taxpayers.

· The state's reliance on property taxes to fund schools should be

reduced, by using a portion of the new state-based revenues from the income and

sales tax changes to enhance education funding.

· Given the significant size of the current FY 2011 deficit – at

least

$9.47 billion – any education funding enhancement should be phased in over

time,

as the state’s deficit problems are resolved.

· The tax policy reform recommendations identified in this study will:

raise a net of $7.8 billion in new recurring General Fund tax revenue (after

netting out the $1 billion plus tax relief it provides to low and middle income

families and the $493 million in property tax relief it provides to homeowners);

eliminate the structural deficit; enhance education funding; and maintain total

state and local tax burden in Illinois in the bottom half of the nation.