Readers have doubtless heard about the Fair Tax Constitutional Amendment on the Nov. 3 ballot. The proposal is simple: it would permit Illinois income to be taxed at different rates, with higher incomes taxed at higher rates and lower incomes taxed at lower rates. The League of Women Voters of Oak Park-River Forest offers the following facts for voter consideration.
State spending: For decades, under multiple administrations, the state has kicked the can down the road, piling up billions in unpaid bills despite serious funding cuts. Since 2000, spending cuts on core services (education, health care, human services, and public safety) have exceeded 20 percent, and cuts to higher education have approached 50 percent. The state cannot further cut its way out of the deficit without undermining core state services and placing additional burdens on local governments and school districts.
The state’s failure to shoulder its share of the cost of preK-12 education has led to high local property taxes and huge inequities in the quality and adequacy of education between zip codes. Under the rates set by the legislature to go into effect if the constitutional amendment passes, the state will gain around $3 billion a year in new revenues, by raising taxes only on the top 3 percent with incomes above $250,000, and for small businesses, raising taxes only when pass-through profits exceed $250,000 per owner. These new revenues will be used to meet state obligations and improve education equity, while easing pressure on property taxes.
Middle Class Income Tax: Our current flat tax system exacerbates income inequality and racial wealth gaps by shifting wealth from low-income households, especially households of color, to the wealthiest, mostly white households. Changing the constitution to allow a graduated-rate income tax is the best tool to spread the total burden of state and local taxes more fairly. Today, high-income earners have just half the tax burden of the lowest 20 percent of earners as a share of their income, making Illinois one of the most regressive states. The constitutional amendment and higher tax rates for the wealthy will help balance this inequity and strengthen poorer communities through greater health-care access, improved education funding, and workforce development. If the constitutional amendment does not pass, revenues will likely be raised through the flat income tax, hitting low- and middle-income families hardest.
Retirement Income: The legislature has the authority today to tax retirement income; nothing in the constitution prohibits it. Illinois is one of just a dozen states that has chosen not to collect income tax on any retirement income such as 401(k), IRA, pension or Social Security benefits. The Fair Tax amendment doesn’t change that. AARP of Illinois, the Illinois Alliance for Retired Americans, and Jane Addams Seniors in Action all support the Fair Tax.
The Fair Tax is not a panacea or a quick fix, but it is sound tax policy. Moving Illinois from a flat tax to a graduated one, like that used by a majority of states and the federal government, is a prudent and necessary step in building a stronger financial foundation for Illinois.
Please look for it near the top of your ballot and vote Yes.
Beverly Graham is president of the League of Women Voters of Oak Park-River Forest.