What should government do? Rauner—less; Quinn—more | Bleader

Monday, November 3, 2014

What should government do? Rauner—less; Quinn—more

Posted By on 11.03.14 at 12:30 PM

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Governor Pat Quinn pushed for tax hikes despite the political risks.
"Bigger government means more corruption," Bruce Rauner says.

Like most of the catchphrases of the Republican candidate for Illinois governor, the important thing is that it polls well. Rauner is against corruption, pro-growth, and anti-waste. Job creation is his top priority, and he's really down with transparency. He wants to overhaul the tax code to make it "fair." He'll fight the special interests, shake up Springfield, and bring back Illinois.

Rauner has been able to drill his platitudes into the heads of Illinois voters thanks to the millions of his personal fortune that he's lavished on ads. Never has so much been spent to tell so many so little. Other than lowering taxes—another standard come-on to voters—what does he actually propose to do as governor? The businessman without a plan will get back to us after he's elected. We're supposed to trust his ability to solve public problems because he made a killing in private equity.

But let's focus for a moment on his defining slogan: "Bigger government means more corruption." It's the jaundiced view the GOP has been espousing for decades. "The nine most terrifying words in the English language are, 'I'm from the government and I'm here to help,'" Ronald Reagan gleefully said in 1986.

Rauner's not as clever, but he certainly endorses the Reagan sentiment. Which is: government—bad.

And taxes—worse. Taxes are repellent to Rauner. Illinois is a "tax-happy" state, he says. "Everywhere Illinois families turn, they are crushed by taxes."

Bruce Rauner pledges to lower Illinois taxes.

The Rauners paid $2.9 million in state income taxes this year and $14.4 million in federal income taxes—but their $60.8 million income helped them withstand the crushing. (As for how the Rauners minimized their tax bite, the candidate declined to provide the schedules and attachments that most candidates offer. He took no unfair advantages, though—we have his word on that.)

Illinois is hurting for money, thanks to pension agreements made long before Pat Quinn became governor, and thanks as well to the global recession in 2008 from which most states are still recovering. Quinn did the responsible and brave thing in 2011, when he sought and won a temporary hike in the personal income tax, from 3 percent to 5 percent, and an increase in the corporate income tax, from 7.3 percent to 9 percent. He also cut discretionary spending by 10 percent. He's made some progress on pensions, but they're still a fiscal albatross, so he did the responsible and brave thing again earlier this year, advocating that the tax hikes, due to expire in January, be extended. Legislators realize this extension is essential, but Republicans blocked it in the spring because of the elections they faced in the fall. After the election they may cowardly do what Quinn proposed.

Even Rauner has hinted that he'd extend the hike initially, but he vows to roll back the personal income tax to 3 percent and the corporate tax to 7.3 percent in his first term. How will he replace the billions lost? Trust him, he'll figure it out.

Illinois has another major problem besides its budget: great and growing wealth inequality. A report earlier this year by the Center on Budget and Policy Priorities showed that the average household income for the wealthiest 20 percent in Illinois is more than eight times the income for the poorest 20 percent, tying the state for the eighth worst disparity nationally. The average income of the top one percent in Illinois—Rauner's class, and he's near the head of it—is $1.1 million; that's 24.5 times what the lower 99 percent average—$44,000.

The gap has widened considerably since the 1970s, during the period in which Rauner was amassing his riches in private equity. A key reason is tax related: Illinois has the fourth most regressive tax system in the nation, according to the Institute on Taxation and Economic Policy, largely because we're one of the few states that still has a flat income tax. Illinois families with the lowest incomes pay the same rate the Rauners pay.

The flat tax is mandated by the Illinois constitution. Democrats in Springfield, and a large coalition called "A Better Illinois," mounted a campaign this spring to put a proposal before voters to amend the constitution and replace the flat tax with a graduated income tax. The proposal failed because only one party—not Rauner's—backed it. Rauner claims to be concerned about the tax burden on the middle class. A tax that made people like him pay a higher rate than people like us would lighten that load, but it's not the kind of tax overhaul he has in mind.

People complain about taxes, and politicians exploit the sentiment, but not everyone shares the Republican perspective that taxes are a millstone. Taxes represent a populace pooling its resources for the collective good. They fund public schools, research, transportation, public safety, the protection of the environment, the maintenance of parks and forests. They go toward caring for the sick and improving the lot of the poor. Graduated taxes also help reduce inequality, although not yet in Illinois.

Taxes fund programs like the one I wrote about recently, Chicago Safe Start, which helps families with young children who have suffered repeated exposure to violence. Safe Start works to disrupt a transmission of violence that's often intergenerational. It saves money in the long term, and ought to be expanded. Instead, because the tax hike hasn't been extended, Chicago's four Safe Start programs might have to close their doors. Many other social service programs are in the same boat. According to the GOP and Rauner's thinking, families served by such programs will eventually benefit once free-market capitalism is allowed to do its thing.

In 2011, the noted American economist Jeffrey Sachs lamented in the Financial Times that U.S. government programs were being "asphyxiated." While Republicans were prevailing in their push for low taxes and small government, the U.S. was "vastly outperformed by northern Europe's high-tax-and-spend states," he wrote. Sachs went on:

These countries tax heavily but also spend efficiently. They buy superb public health, quality childcare, proficient public education, quality infrastructure and remarkable social equality. The results are lower unemployment rates, smaller budget deficits, much lower poverty and smaller trade deficits than in the US. These countries also enjoy higher social mobility, life expectancy and life satisfaction than the US.

"America's greatest shortcoming is the way it treats its poor children," Sachs added. The U.S., he wrote, "increasingly leaves poor children to fend for themselves."

Although his essay focused on the federal government, a fight along these lines is occurring this year in states throughout the nation, including ours.

My colleague Michael Miner believes the governor's race this year requires Illinois voters to pick the lesser of two evils. That's the prevailing view, but I think the contest is about much more than that. The nominees represent two divergent beliefs about government: one holding that it's the problem, the other maintaining that it continues to be a fundamental part of the solution.

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