The recent Fair Tax op-ed from the League of Women Voters stated, “The fair tax will mean ending the injustice of having the highest-income earners pay about 7 percent of their income in state and local taxes while the lowest- and the middle-income earners pay a rate twice as high, up to 14 percent.” Unfortunately, this is a misrepresentation of the facts and requires more explanation.
These percentages come from a study known as “Who Pays” by the progressive think tank ITEP. “Who Pays” provides a breakdown of the overall tax burden by tax bracket for each state using three components: income, property, and sales taxes. It then adds these percentages together and ranks the states by the perceived progressivity of their tax structure.
While Illinois’ lowest earners (anyone making below $21,800) do indeed pay an overall tax rate of 14.4%, state income tax comprises only a tiny portion of that total (1.5%). The overwhelming majority comes from property (6%) and sales (6.8%) taxes. Even a significant income-tax reduction for these folks, which the Fair Tax does not offer, couldn’t move the needle much. Property and sales tax are the main drivers of tax burden for the lowest earners in Illinois, not income tax. Since the Fair Tax does nothing to address either of these, low earners will continue to struggle under the Fair Tax.
According to ITEP, Illinois has the third highest tax burden in the country for these low earners who comprise the lowest 20% of all taxpayers in the state. Even worse, Illinois has the second highest tax burden in the country for anyone earning between $21,800 and $109,500 (what ITEP calls the middle 60%). Again, the Fair Tax rate structure does little to nothing to address their overall tax burden. In other words, under the Fair Tax, the bottom 80% of all taxpayers will have one of the highest tax burdens in the country. The Fair Tax will own this.
Fixing Illinois’ finances is going to require more than lazy analysis and half-truth slogans. I encourage the LWV and other Fair Tax advocates to be more forthright in their communications. Voters deserve to know the facts about the Fair Tax, good and bad, so they can make an informed decision.