7 misleading progressive tax claims public unions are telling Illinois members

Mailee Smith

Senior Director of Labor Policy and Staff Attorney

Mailee Smith
September 30, 2020

7 misleading progressive tax claims public unions are telling Illinois members

Government unions and their PACs have spent more than $1 million pushing the progressive tax on the Nov. 3 ballot – and are using misleading information.

Government unions and their political action committees are pouring money into one of the campaign committees supporting the progressive tax amendment that will appear on the Nov. 3 ballot in Illinois.

To date, Vote Yes for Fair Tax has received more than $1 million from public employee unions. They include AFSCME Council 31, the American Federation of Teachers, the Illinois Education Association and its PAC, the Illinois Federation of Teachers and its PAC, the National Education Association and SEIU Healthcare and its PAC, according to records with the Illinois State Board of Elections.

The unions are feeding misleading information to their members in an effort to bolster votes for the tax hike.

Here are seven of the top misleading claims unions are pushing, followed by the realities union members should remember when they vote.

Misleading claim No. 1: 97% of taxpayers will get a tax cut or pay the same as they do now.

Reality: The progressive tax will make it easier to raise taxes on everyone in the future.

There is no guarantee that lawmakers won’t raise taxes on the middle class in the future. Claims to the contrary are simply a bait and switch. Taxes for many middle class families may stay the same for now – but that will likely change later.

That’s exactly what happened in Connecticut. Middle class tax rates have gone up 13% since the state switched from a flat tax to a progressive tax system – the only state to do so in the past 30 years. And in the 32 states with progressive income taxes, 18 of them subject middle-class families to the highest rate.

The Illinois Education Association has claimed the progressive tax will allow “higher rates for higher incomes and lower rates for people with low and moderate incomes.” But the opposite is also true: it would allow lawmakers to enact lower rates for higher incomes and higher rates for lower incomes.

That’s because lawmakers would have the legal authority to charge any income rate to any taxpayer with a simple majority vote. The amendment itself merely allows the General Assembly to provide a tax “rate or rates” to be applied to income and does not specify what those rates must be. The General Assembly could, theoretically, choose to charge higher rates to lower income taxpayers.

Misleading claim No. 2: The current way of taxing is “unfair.”

Reality: The Illinois Constitution currently guarantees a flat tax rate, and taxpayers with higher incomes pay more in taxes than taxpayers with lower incomes.

The constitution’s drafters in 1970 included a flat tax guarantee in order to ease voters’ fears that the state’s first income tax – which went into effect in 1969 – could be raised easily in Springfield. The current system forces lawmakers to tax everyone at the same rate, making it harder for them to raise taxes because voters can hold them responsible.

By definition, a flat tax system applies the same tax rate to every taxpayer. And that means someone earning a higher income pays more than someone with a lower income.

What unions are proposing is actually unfair, making it easier for lawmakers to target middle-class Illinoisans with future tax hikes.

Misleading claim No. 3: The progressive tax won’t give lawmakers any more or less power to increase taxes than they’ve always had.

Reality: It is easier to raise taxes under a progressive income tax than it is under the current flat tax.

The current flat tax makes it harder for politicians in Springfield to raise taxes. It’s all or nothing; they raise income taxes on everyone or no one. And that encourages political accountability through public outcry. In fact, about 30% of the lawmakers who voted for the 2017 tax hike were either forced to retire or voted out of office.

A progressive tax, however, allows lawmakers to segment Illinoisans into small income groups and increase taxes on each, one at a time. Nothing limits the number of income brackets lawmakers can create under the progressive tax amendment; they could add more and more brackets, targeting smaller groups for tax hikes.

Dividing taxpayers into smaller and smaller segments makes it harder for them to mobilize against tax hikes and helps politicians avoid a unified public outcry and accountability at the polls.

Misleading claim No. 4: The progressive tax won’t touch retirement income.

Reality: The Illinois treasurer has indicated a progressive tax will make a retirement tax more likely.

There is no guarantee under the progressive tax amendment that lawmakers won’t later tax retirement income. All 32 states with a progressive tax also tax retirement income. It would become significantly more likely that Illinois would adopt a retirement income tax. That’s because removing the flat income tax protection also removes a key political barrier to imposing a tax on retirement income.

Illinois State Treasurer Michael Frerichs recently confirmed that taxing retirees will be possible under the progressive tax.

“One thing a progressive tax would do is make clear you can have graduated rates when you are taxing retirement income,” he said while speaking at an event hosted by the Des Plaines Chamber of Commerce. “And, I think that’s something that’s worth discussion.”

Misleading claim No. 5: Money from the progressive tax will adequately fund schools, health care and other public services that are currently struggling.

Reality: A progressive tax will not solve Illinois’ fiscal issues.

Raising taxes to attempt to make ends meet has been the modus operandi of Illinois lawmakers for years – and it has never worked the way they claimed it would.

Education, health care and other services have not seen the promised levels of funding after several massive tax hikes in recent years, despite proponents’ claims.

After the 2017 income tax hike, Illinois’ total tax burden became at least the 6th highest in the nation. But despite regular tax increases and record revenues, the state has not balanced a budget in 20 years.

Illinois has a spending problem, not a revenue problem. Most of the overspending is for pensions. Inflation-adjusted pension spending has increased more than 500% since 2000, causing spending on other core government services to fall by nearly one-third during the past 20 years.

Illinois will not be able to fix its pension crisis or achieve a truly balanced budget without a constitutional amendment that allows for pension reform. The “fair tax” amendment that would allow for ever more tax hikes cannot fix the problem.

Misleading claim No. 6: The progressive tax will reduce property taxes.

Reality: Nothing in the progressive tax amendment provides property tax relief.

While some unions have hinted the progressive tax amendment could help reduce property taxes, Illinois Federation of Teachers President Daniel Montgomery claimed in a recent IFT newsletter that “the fair tax will … reduce property taxes.”

But there is nothing in the progressive tax amendment itself that makes that claim a reality. Despite rhetoric from the governor that a progressive income tax will provide property tax relief, Pritzker has signed no legislation to make that relief possible.

In addition, the 88-member Illinois Property Tax Relief Tax Force – a special committee charged with finding property tax solutions by the end of 2019 – failed to meet reporting deadlines, demonstrating a lack of serious intent to address property taxes.

What’s more, the progressive tax proceeds the governor proposes to dedicate to paying down pension debt don’t even cover the increase in annual pension payments, and the remaining amounts would not come close to covering all the spending politicians have promised. That money must come from somewhere, making it even less likely residents will see property tax relief.

Misleading claim No. 7: Small businesses will thrive.

Reality: The progressive tax amendment would mean tax hikes of up to 47% for more than 100,000 small businesses in Illinois.

The progressive tax would hit the state’s largest job creators – small businesses – the hardest.

Taxes would go up by as much as 47% on more than 100,000 small businesses in the state. In fact, small businesses could face an income tax hike nearly five times larger than that for large businesses.

Yet small businesses are responsible for nearly 60% of the net job creation in Illinois since the Great Recession and are the businesses most at risk from the economic fallout of COVID-19.

Although the progressive tax is being sold by unions as a way to lower taxes on the middle class, increase funding for services and shore up government finances, it will fail to fulfill those promises. It would simply be a blank check for lawmakers to create rates to support the spending they want, which inevitably will mean higher taxes for the middle class.

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