Tuesday, September 16, 2014

Illinois ranks #47 for Fairness of Its State and Local Tax System



“The next time you complain about taxes in Illinois, take some comfort in knowing your complaining is justified — at least according to a new report on the fairness of tax systems across the U.S.

“The study from Wallethub focused on federal tax policy and analyzed and ranked each state based on the fairness of its state and local tax system, which included income taxes, property taxes, sales and excise taxes.

“Where does Illinois fall? No. 47. 

“Arkansas, Hawaii and Washington are the only states with more unfair tax structures. This comes after a study in May from the Institute on Taxation & Economic Policy that placed Illinois' flat income tax in the ‘Terrible Ten’ across the country…

“So what is a ‘fair’ tax system? According to the Wallethub survey, Americans favor a progressive tax structure where higher income households pay a larger percentage than lower income households.”

from Illinois has one of most unfair tax systems, study shows by Chad Merda



Illinois' flat income tax places it in the 'Terrible Ten'

“Illinois is one of the ten most regressive states in the country, according to the nonprofit, nonpartisan Institute on Taxation & Economic Policy. A state is regressive if it requires the poor to pay a greater share of their income in taxes than the rich. In Illinois, the state’s poorest residents—those in the bottom 20 percent of the income scale—pay almost three times as much of their earnings in taxes as the top one percent do.

“Illinois' flat income tax is one of the primary reasons ITEP ranks the state as the fourth most regressive. A flat income tax means the state takes the same percentage of income from everyone, regardless of how much or how little they earn.

“Illinois is one of only ten states with a flat tax rate. There are seven states that collect no taxes on individual income. 

“Illinois increased the tax rate on individual income from 3 percent to 5 percent in 2011. That increase is set to expire January 1, 2015. Speaker Michael Madigan reports that the House Democratic caucus is almost 30 votes shy of the 60 needed to make what was a temporary increase permanent.

“If Illinois fails to extend the tax rate of 5 percent, it will have the third lowest individual income tax rate of any state with a flat tax. According to the Tax Foundation, only Indiana and Pennsylvania will have lower rates, at 3.4 and 3.07 percent respectively.

“Illinois depends on individual income taxes for 42 percent of its tax revenue, according to the U.S. Census Bureau. Taxes on individual income bring in more money for the state than any other tax. This wasn’t the case in 2009, when half of the state’s tax revenue came from sales tax. Sales tax revenue has steadily declined since then, though, due to the Great Recession.”

from Illinois' flat income tax places it in the 'Terrible Ten' by Scarlett Swerdlow


Commentary:

What is needed to solve the budget problems in Illinois is a better revenue base to pay the state’s self-induced debts. What is easier to do is to evade serious problem solving of the budget issue and to incriminate the state’s public employees.

The issue at hand is the state’s regressive or flat tax rate that no one wants to confront. The public lacks awareness and understanding about the main causes of the state’s budget deficits. Legislators, the Civic Committee, et al. have capitalized on the public's ignorance of the essential causes of the state's financial debacle by calling for budget cuts and radical pension reform as the solutions. They are diversionary, scapegoating tactics that allow legislators to escape legal and ethical responsibility.

“At the core of the budget ‘crisis’ facing [Illinois] is [its] regressive state tax structure… that is, low-and-middle-income families pay a greater share of their income in taxes than the wealthy… [A regressive tax] disproportionately impacts low-income people because, unlike the wealthy, [low-income people] are forced to spend a majority of their income purchasing basic needs that are subject to sales taxes” (United for a Fair Economy).

Instead of reforming the state's tax system, legislators (and their wealthy subsidizers) have focused on radical pension reform and severe budget cuts to services that the rest of us need. Why can’t the State of Illinois provide a fair and sound tax system (Illinois is one of seven states with a regressive flat-rate tax), one that is “efficient with minimal impact on the economic decisions that taxpayers have to make” (Center for Tax and Budget Accountability), one that captures increased revenues in times of economic growth, one that maintains revenue collections during poor economic times, one that is simple and not liable to inconspicuous error, one that is transparent and builds trust with the state’s government officials (CTBA), and one that helps 99 percent of the state’s population?

The answer is most legislators in the State of Illinois prefer the easy way out of a difficult and challenging situation. Illinois legislators will not address the most important causes of the state's budget deficits: the state's flat-rate taxation and pension debt because of their own self-interests and the wealthy one percent that bankrolls them.

For the entire article, click on Tax Reform! Not Pension Reform, Budget Cuts and Tax Breaks for the Wealthy


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