5 broken tax promises show why Illinois voters distrust Pritzker’s ‘fair tax’
From the lottery, to the tollway, to two “temporary” income tax hikes, Illinois politicians have a history of broken promises about how they tax and spend residents’ money.
On Nov. 3, 2020, voters will decide whether to amend the Illinois Constitution to eliminate the current flat tax guarantee and allow for the adoption of a $3.4 billion progressive income tax hike. Gov. J.B. Pritzker has made numerous promises regarding the benefits of this tax plan.
But a look back at Illinois politicians’ history of broken promises regarding taxpayer money helps explain why nearly half of likely voters in a recent survey view the plan as nothing but a “blank check” for more taxes and higher spending.
When it comes to tax hikes, broken political promises aren’t unique to one party. And they’re not unique to Illinois.
The last state to adopt a progressive income tax was Connecticut in 1996. Proponents made very similar claims to those being used to sell a progressive tax in Illinois, including middle class tax relief, balanced budgets and no economic damage. But all of these promises were broken. Instead, Connecticut’s tax change was followed by a 13% jump in middle class income taxes, a 35% increase in property taxes, a sharp increase in poverty and continued budget deficits.
Already, it is clear that Pritzker’s progressive tax math doesn’t add up. Pritzker has promised at least $10 billion in new spending on what he says will be $3.4 billion in new revenue. Research from the Illinois Policy Institute has found that if a progressive tax were used to fully pay for all the new spending promised by the governor, middle income families could see a tax hike of up to $3,500.
In each of the following five examples, state lawmakers ultimately misled Illinoisans about how much tax money they would take or how it would be used.
1) Transportation taxes will fix broken roads and bridges
Transportation infrastructure is generally funded by a “user fee” model of taxation, with gasoline taxes being the most common example. There are two essential concepts that make the user fee model work:
- People should pay for road work in relation to how much they use the roads, because more frequent drivers both benefit more from infrastructure spending and are responsible for more of the wear and tear.
- Money raised from transportation services should go directly to transportation costs and not be used to fund unrelated spending.
Illinois politicians have frequently broken the promise of the user fee model by misusing gas tax revenue and other infrastructure dollars.
From 2002 to 2015, state lawmakers took $6.8 billion from transportation funds and used it for other purposes, according to the Transportation for Illinois Coalition. In response, voters overwhelmingly approved a “lockbox amendment” to the state constitution, with nearly 80% voting in favor in 2016. The amendment is intended to ensure that revenues related to transportation, such as gas taxes and vehicle registration fees, can only be used for transportation expenditures. But while the amendment might give taxpayers some added assurance that revenue will flow where it is supposed to, raiding the road fund is only one of the ways lawmakers have historically broken public trust regarding infrastructure spending.
In 2017, a federal investigation into hundreds of “staff assistant” hires made at the Illinois Department of Transportation found the agency had for years been doling out patronage jobs to politically connected applicants. The agency pushed candidates through the application process with “‘little or no regard’ for actual hiring need, or whether the candidate was qualified for the job,” according to the Chicago Tribune.
And in September 2018, the Daily Herald reported the board chair of the Illinois State Toll Highway Authority awarded a number of six-figure positions to political allies. The agency had also contracted with firms staffed by officials’ relatives and former political associates to the tune of hundreds of millions of dollars.
In other words, transportation revenues have been used to serve the political ends of government officials rather than for their intended purpose.
The last major capital plan prior to 2019, the 2009 Illinois Jobs Now! program, was infamous for wasteful projects, such as $670,000 for copper-plated doors and $500,000 for chandeliers and sculptures, both for the Illinois Capitol building in Springfield.
Unfortunately, politics and potentially even criminal corruption continue to be a factor in Illinois’ infrastructure planning.
Pritzker and the General Assembly enacted a $45 billion capital bill in spring 2019 funded by numerous tax and fee hikes – including doubling the state gas tax – without any controls to ensure projects were picked on merit alone. Illinois Policy Institute analysis identified at least $1.4 billion in wasteful and politically motivated spending in the plan. In truth, because Pritzker’s administration did not release a full list of projects or justification for why projects were selected, the waste tally could be even higher.
Most recently, a federal investigation involving state Sen. Martin Sandoval, D-Chicago, has raised questions about potential corruption tied to the new capital plan. Sandoval was the chairman of the highly influential Senate Transportation Committee and a key backer of Pritzker’s infrastructure package.
2) Toll free in ‘73
“Toll free in ‘73” was a popular slogan decades ago in Illinois, according to a 2011 report from ABC 7. Politicians promised drivers that tolls would be temporary. Once initial bond debt for 187 miles of new tollway construction was paid off, the tollway authority was supposed to dissolve, with continued highway maintenance funded by the gas tax rather than tolls.
But Illinois drivers are still paying those tolls, which have become a growing cost.
Revenues exceeded expectations and the original bonds were eventually paid off, but the tolls still remained on Illinois roadways. Lawmakers made the authority permanent in 1968, creating the Illinois State Toll Highway Authority that exists today.
While former Gov. George Ryan revived the promise of ending the tollway in 1999, that promise ended with his governorship in 2003.
The Illinois Tollway’s budget for fiscal year 2019 was $1.5 billion. That’s more than double the $680 million budgeted in 2009. A look at the tollway’s revenues during the past decade, adjusted for inflation, shows just how costly the now-permanent agency has become for Illinois drivers. Revenues collected from tolls and fines for missed tolls have gone up 90% in just 10 years.
Over the course of those 10 years, the Illinois Tollway has hiked toll fares four times. Today, tolls sit at $1.50, up from $0.80 a decade earlier.
While there is room for debate about the best way to fund highway maintenance, there is no doubt that today every toll paid serves as a reminder of Illinois political leaders’ long history of broken promises.
3) The lottery will fund education
When lawmakers first debated and ultimately passed legislation creating the Illinois Lottery, some of the public opposition to the idea was overcome by promising the money would be used to fund K-12 education.
A 1973 newspaper article from The Daily Leader in Pontiac, Illinois, told its readers that under lottery legislation recently passed, “the state share [of lottery revenues] would be used entirely for public schools.” Initially, this promise was broken because lottery revenues were deposited into the state’s General Revenue Fund, which pays for far more than just schools.
But in 1985, former Gov. Jim Thompson signed legislation ensuring all lottery proceeds were deposited directly into the Common School Fund, which is the portion of the general state budget that funds public education. As a result, today lawmakers can claim most lottery revenues are technically “funding education.” Unfortunately, a closer look shows that the promise of lottery proceeds going to education is little more than a turn of phrase.
As far back as 1991, the Southern Illinoisan reported that saying lottery proceeds all go to the Common School fund is “both accurate and meaningless.” More recently, WBEZ referred to the use of lottery proceeds by the state as a “shell game.” The main reason is that inflows from the lottery do not typically represent a net increase in state spending on education. Instead, lottery money simply frees up revenue from other sources that would have gone to education, and lawmakers are able to spend it on other things.
Lottery money never really makes it to the classroom. Instead, those revenues are more than eaten up by annual contributions to the teachers’ pension system.
Pension contributions to the Teachers’ Retirement System, or TRS, are paid from the Common School Fund. For the current budget year, fiscal year 2020, net lottery proceeds after payouts and expenses are projected to be $745 million. Meanwhile, the state’s payment to TRS this year is just under $5 billion.
Lawmakers sealed the deal on this broken promise when in 2009 they capped the amount of lottery money that would be deposited into the Common School Fund. All proceeds above and beyond 2009 funding levels are now diverted to capital projects.
4) 1989 “temporary” income tax hike
Thirty years ago, a different Illinois governor successfully pushed a different income tax hike through the General Assembly.
Back then, former Republican Gov. Jim Thompson was pushing for the tax increase while House Speaker Mike Madigan, D-Chicago, initially stood in its way, according to reporting from the Chicago Tribune at the time. Madigan eventually came around to supporting a temporary increase in the income tax rate to 3% from 2.5% and passed legislation to put it into effect.
Similar to the arguments of tax hike proponents today, new revenue from the higher rate was supposed to improve state funding for education and cause local governments to lower property taxes.
The 1989 tax hike was set to automatically expire in 1991, but lawmakers extended it for two years and ultimately voted to make the higher rate permanent in 1993.
Taxpayers were subjected to a nearly identical replay of this broken tax promise 24 years later.
5) 2011 “temporary” income tax hike
Citing budget pressures caused by the Great Recession, former Gov. Pat Quinn and the General Assembly hiked individual income taxes again in 2011 to 5% from 3%. Lawmakers went on record making a number of lofty promises, including:
“We have some temporary tax increases that are designed to pay our bills, get Illinois back on fiscal sound footing and make sure that our state has a strong economy.” – Gov. Pat Quinn
“The purpose of this bill is to raise enough money so that we can continue to pay our pensions without borrowing the money, to pay off our debt, to have enough money to pay the interest on that debt …” – Senate President John Cullerton
“… remember the point of this income tax increase is not to expand programs, not to do brand new things in Illinois state government, it is only intended to pay our old bills and deal with the structural deficit.” – House Majority Leader Barbara Flynn Currie
The rate was set to partially sunset in 2014 to 3.75% and fall further to 3.25% in 2025.
Instead, lawmakers only allowed the partial sunset to occur for two years, and voted to bring the rate almost all the way back to its highest-ever level in 2017. The increase to 4.95% was the largest permanent income tax hike in Illinois history.
Not only did Illinois politicians break their promise that the tax hike would only be temporary, but the tax increase failed to live up to the promises made by proponents in terms of actual results, such as fixing the state’s finances and paying down pension debt.
Pension debt has continued to rise faster than new revenue collections, and Illinois’ pension debt to revenue ratio remains the nation’s worst.
Meanwhile, the state’s deficit in its net position – a measure of financial health similar to an individual’s net worth – has more than quadrupled since 2011, growing to negative $189.1 billion from negative $43.6 billion.
Tax hikes are also a leading cause of the state’s poor growth and make Illinois uncompetitive with neighboring states. Since the originally “temporary” tax hike in 2011, all six of Illinois’ neighboring states have cut their income taxes. It’s no coincidence that other states are better able to attract investment and grow jobs.
Illinoisans are right to be wary of a progressive income tax
Polls have found that Illinois residents have the lowest levels of trust in their elected officials in the United States, by far. Considering how Springfield politicians have regularly broken their promises on how much taxes or fees would go up, for how long and how that money would be used, who can blame them?
And while the five examples above represent some of the biggest broken promises, there are many more instances of lawmakers violating the public’s trust. Recently, for example, a savings program to help residents afford in-state higher education by locking in lower tuition rates, College Illinois, went bust.
A progressive income tax would bring about a series of broken promises that eclipse anything Illinoisans have seen before. Contrary to Pritzker’s promises, a progressive income tax will lead to slower growth in jobs, wages and economic output. Property taxes will continue to rise. And when new revenue comes up short and fails to fix the state’s finances, lawmakers aim to raise rates on everyone, not just the wealthy.
The simple truth is that without pension reform, a progressive income tax virtually guarantees middle class tax burdens will go up. Already, the burden of Pritzker’s 20 tax and fee hikes this year more than wiped out the minimal income tax relief Pritzker has promised to middle class families under his initial rate plan.
Illinois voters are increasingly wary of tax promises from their political leaders. Until and unless Springfield adopts reforms that upend the status quo – such as a constitutional amendment to allow pension reform and a spending cap that ensures lawmakers don’t spend more than taxpayers can afford – this mistrust will be more than justified.