Zorn, the Capitolfax Chorus, and Joravsky on Taxes | Bleader

Thursday, October 21, 2010

Zorn, the Capitolfax Chorus, and Joravsky on Taxes

Posted By on 10.21.10 at 12:34 PM

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Things that got me thinking today:

1. Eric Zorn flags Bill Brady saying, in Wednesday's debate, that we need to be more like Indiana and Tennessee, so he looks at the comparative taxes.

2. Rich Miller flags the same quote and cites Zorn's numbers. It's a really good post, but it does raise questions. For instance:

3. Miller's commenters, who are always interesting, focus on the role and amount of property taxes which, as Ben Joravsky pointed out last week, Illinois is heavily dependent on:

There's another thing to keep in mind as you prepare to cast your vote. The larger problem—which eclipses the assessor's race—has to do with Illinois's overdependence on property taxes, particularly for funding education. In Chicago roughly half of property taxes go to the public schools. It's well over 60 percent in many of the suburbs, like Evanston and Wilmette.

But to cut the amount people pay in property taxes we'll either have to cut the amount government spends or hike the state income tax.

That would seem to track the numbers from the Tax Foundation.

And we also know, from reading Joravsky, not to mention David Bernstein in Chicago Magazine, that property taxes are not only "as much an art as a science" but also arguably favorable to commercial real estate.

So the conclusion I draw is that Illinois's revenues lean heavily on an aspect of taxation that provides unstable levels of revenue which are difficult to control due to the complexity of the system, but also one that's been hit particularly hard during the collapse of the housing market.

Now let's switch gears. It's also compellingly argued that Illinois has a very non-progressive tax burden, which Progress Illinois has written about at length. Because income taxes are constitutionally required to be flat across income brackets, the tax burden by percentage of income grows the further you go down the ladder:


That's from a 2008 paper from the Center for Tax and Budget Accountability (PDF). Here's another table:


It's just through 2005, but the conclusion I get—philosophical questions about the fairness or lack thereof of a flat income tax—from this is that state revenues are, more so than in many other states, more reliant by percentage on classes whose incomes have stagnated or dwindled.

And overall the conclusion I draw from this is that among Illinois's many budget problems, the state's system for generating revenues has been particularly unsuited the current, ongoing economic crisis. Obviously a progressive tax structure isn't a magic bullet—California has a progressive income tax, and they're pretty screwed too—but Illinois's tax system seems particularly difficult to budget around in the current economic climate. Then again, I'm still trying to wrap my head around it, so I'm happy to be corrected or otherwise informed. Seriously, I'm just—to use a term I sort of loathe—spitballing here.

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