Just what Illinois needs . . . a millionaire’s tax

Last updated on: March 21, 2014 at 8:45 am by Jane the Actuary

Just what Illinois needs . . . a millionaire’s tax 2014-03-21T08:45:00-06:00 Jane the Actuary

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Here’s the first paragraph in the lead article in the Chicago Tribune today:

Illinois Democrats went all-in Thursday with their election-year class warfare theme as Speaker Michael Madigan pitched the idea of asking voters to raise taxes on millionaires, Senate President John Cullerton advanced a minimum-wage increase and Gov. Pat Quinn compared wealthy opponent Bruce Rauner to TV villain Mr. Burns.

The last two of these are unsurprising — we can expect to see a lot more along the same lines in the coming months, as the Democrats aggressively paint Rauner as someone who only cares about enriching “the 1%” at the expense of the rest of us, regardless of the truthfulness of those allegations.

But the first of these is a pretty good illustration of why Illinois is so broken.

In the first place, there are two ways to get an amendment onto the ballot: the hard way, collecting petitions, and the easy way, possessing a supermajority (the result of having a majority during redistricting and going all-out to draw advantageous districts) which simply votes to put the amendment onto the ballot. Good-government groups working for independent redistricting get the hard route. Entrenched politicians looking for a way to put an issue on the ballot that fits with and reinforces their attacks on their opponent get the easy route.

The idea itself is simple: the Illinois personal income tax rate is a flat rate, currently 5%. Madigan’s proposal (which so far seems to be a proposal, with few concrete details) is to add an additional tax of 3% for everyone with income of over $1,000,000, with the revenue raised to be doled out on a per-head basis to schools.

What’s so magical about $1,000,000? Nothing really, except that it’s symbolic and round. Why a constitutional amendment? Because currently the Illinois constitution requires a flat tax. Why not amend the constitution to allow for graduated tax rates, and then fix the particular rates/brackets with legislation, so they can be adjusted over time? Because it’s about forcing your opponents to line up on the question of whether they’re on the side of “millionaires” or “the people,” and causing them to squirm if they object.

(Would the new tax actually benefit school kids, in the long term? Of course not. If a new stream of revenue is dedicated to schools, then there’s plenty of room for existing funding to be cut. Anyone who believes this is going to “help the kids” probably also believed that the so-called temporary income tax increase, from 3% to 5%, was actually temporary. But it’s not about helping “the children”; it’s about helping Quinn.)

If such a tax were passed, and millionaires paid a tax rate of 8%, would they leave the state? Here’s what Madigan says:

“Well, if they’re in Illinois today, they’re probably so much in love with Illinois that they’re not going to leave.”

Yeah, I thought this was flaky too. But I imagine that Madigan is just acknowledging that Illinois’ business climate is already pretty lousy, and the wealthy have stayed put due to family ties, or because it’s not so easy to uproot a business. But the future of Illinois depends on more than keeping millionaires around and siphoning off their wealth. Perhaps Madigan’s mindset, after so many years in Illinois politics, is truly one in which wealth is created by pay-to-play and other political manoeuvers, so he really doesn’t understand what it takes to have a healthy economy.

But with respect to both the minimum wage hike and the “tax the rich” scheme, the Democrats are demonstrating that political power is more important to them than a prosperous state.

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