It’s simple division. Divide the dollar size of our problems by the number of high earners. That’s the subject of my monthly article in Crain’s this week.
Make the case that it would be fairer to make the rich pay more if you want, but the notion peddled by proponents, especially J.B. Pritzker, that it would go a long way towards solving our fiscal crisis is a myth. There just aren’t enough of them. If we try to stick them with the lion’s share of the bill, the numbers become preposterous. They’d flee immediately.
From my article:
Start with how many rich taxpayers there are. Pritzker says he wants to increase taxes on “millionaires and billionaires” and cut taxes for the middle class. Let’s assume that means only taxpayers with over $150,000 in annual income get a tax increase. That’s mighty generous because many of those obviously aren’t millionaires. Illinois has 552,000 taxpayers reporting that much income, which is about the top 9 percent of all taxpayers, based on data we obtained from the Illinois Department of Revenue.
Then do the division.
Moody’s says the state’s unfunded pension liability alone is $250 billion. Divide that by those 552,000 big earners and they’d be on the hook for $453,000 for pensions alone. They wouldn’t have to pay that immediately, but that would be the present value of their average burden.
And that’s just the start. Unfunded health care obligations, which are constitutionally guaranteed along with pensions? Another $56 billion, or $101,000 per taxpayer. The bill backlog with the Illinois Comptroller? Another $15,000 per taxpayer.
Beyond those items already accrued, ongoing losses and further unfunded problems must be addressed. Illinois has been running $11.7 billion in the red on average for 10 years. That’s from the most recent audited financial statements (not phony budget numbers). Assume, optimistically, that loss rate doesn’t worsen, and reduce it by the $5 billion per year expected from last year’s tax increase. We’re still left with $6.7 billion of likely losses going forward. That’s another $12,000 per year on average for those earning over $150,000.
How about the additional $350 million every year for 10 years that’s needed to reach “adequate” funding under the new formula for schools? Another $6,300 per taxpayer reporting more than $150,000.
Most important, local property taxes are the fire burning out of control. With effective rates in many communities over 3, 4 or 5 percent, many of these levies must be rolled back, and that will mean further pressure on the state to fill the gap. That cost is unknown but unquestionably monstrous.
Finally, there’s Pritzker’s promise of universal health care, early childhood education, better funding for schools and a tax cut for the middle class. We don’t know what that would cost but it doesn’t matter because the numbers are already silly.
Pritzker has quietly, occasionally mentioned that a progressive tax increase might not be enough to raise all the revenue he thinks we need, but he has loudly and routinely exploited the popular notion that undertaxed, prosperous Illinoisans can cover most of it.
Duck the specifics and leave voters to their fantasy, in other words. Maybe that will work. Or maybe voters will start doing the division themselves.
-Mark Glennon is founder and executive editor of Wirepoints.