Tax & Pension Policies in Illinois
Rich Egger’s guest on Emphasis is Ralph Martire, executive director of the Center for Tax and Budget Accountability. He was in Macomb to give a presentation at Western Illinois University.
Martire said the tax structure in Illinois is unfair. He cited the flat income tax required by the Illinois Constitution as the main culprit. He agrees with the idea that those who benefit the most from the system should pay the greatest tax burden to support it.
Martire said the constitution can be amended if the House and Senate agree to put the issue on the ballot and it is then approved by voters. He sees no reason why lawmakers shouldn’t agree to the ballot initiative.
“If you’re in the legislature, when you vote to allow the graduated rate structure to go to the people – to your constituents – in a vote, you’re not deciding. You’re letting your constituents decide how they want to be taxed,” Martire said.
“I don’t know of anything in conservative ideology that says you shouldn’t listen to your constituents on how they want to be taxed.”
He acknowledged some of those who run for office will try to make political hay of the issue. But he said there is no evidence that states with graduated income taxes are hurt economically.
Martire also believes that state budget cuts end up harming the private sector economy. He pointed out that 90% of state funding in Illinois goes to education, health care, social services, and public safety.
“Those are all labor intensive. So when state government cuts its spending, what it’s really cutting is the wages and salaries of the teachers and the social workers and the health care providers and the correctional officers that provide these services,” Martire said.
“Our entire economy is driven by consumer spending. So when you’re cutting the wages and salaries of workers who then can’t spend in a consumer economy, that hurts the private sector.”
He said states with the lowest taxes have experienced the most trouble rebounding from the recession because they’ve had to cut spending more.
Regarding the state’s pension system, Martire said the crisis has not been caused by salary or benefit increases and it’s not the result of people living longer. He said if those were the only factors, the system would still be more than 80% funded, which is considered healthy.
Instead, the pension system is only 40% funded because the state has borrowed against what it owed the system for more than 50 years and it implemented a backloaded repayment schedule.
He said both the Democratic and Republican parties caused the state’s pension problem, but he said instead of searching for scapegoats the focus should be on fixing the problem.
“The data are very clear on what Illinois needs to do: expand the sales tax base to include consumed services, have a graduated rate structure for its income tax, and re-amortize its pension debt,” Martire said.
He said that would create a low-tax state that still has money to pay bills, provide services, and fund its pension system.
Watch his full presentation at WIU:
Video courtesy of: UPILocal4100wiu