By: Mark Glennon*
Consider for now a single point about Governor Pritzker’s Fair Tax proposal, the specifics of a which he just released.
Assume he is correct that his new tax rates will raise $3.4 billion more for the state. That’s all you need to see that that his central promise to Illinois has been a hoax. Contrary to his persistent claims that a progressive income tax is Illinois’ ticket to salvation, $3.4 billion isn’t remotely close to solving Illinois’ fiscal crisis, much less funding all the other promises he has made.
To put $3.4 billion in perspective, Illinois could put that entire amount into pensions only and it still wouldn’t be enough to meet what’s needed yearly. The true cost is about $4.7 billion more per year than the roughly $7 billion Pritzker’s budget proposes for pensions. That’s based on the “actuarially determined contributions” contained in the most recent actuarial reports, and they’re based on assumptions widely regarded as far too optimistic.
Or consider the new school funding formula. It alone calls for annual increases that raise the annual cost by $3.5 billion ten years from now.
The total cost of stabilizing the state and funding Pritzker’s promises have ranged from $10.7 billion to $19 billion. Is anybody going to believe that $3.4 billion isn’t just more money into the abyss — another tax increase with no reforms? The 2017 tax increase was larger, raising over $5 billion per year. Did that discourage Illinoisans from leaving, as Pritzker said this new tax increase will? (Yes, he really said that at his press conference.)
As for the initial assumption – that Pritzker’s tax would raise even the $3.4 billion he claims – don’t believe it. Independent scoring will be coming. For one thing, Pritzker’s estimate is not “dynamically scored,” meaning it doesn’t account for tax avoidance that results from tax increases, such as people shifting their investments to tax-free alternatives or just moving out of state.
Pritzker said his newly proposed budget is a “bridge” to get us to where we need to be. “To get to fiscal stability and eliminate our structural deficit, there’s no quick fix,” he said in his recent Budget Address. “A fair tax system will allow us to eliminate the structural deficit that has plagued our state for nearly two decades.” That and much more would be funded through his Fair Tax, he said repeatedly during his campaign.
We will have much more coming soon on Pritzker’s tax proposal.
*Mark Glennon is founder of Wirepoints.