Christmas wish list: 12 gifts for Illinois taxpayers in 2019
In 2018, Springfield handed Illinoisans more of the same repackaged policy failures. Lawmakers in the coming year should tape to their desks this wish list of taxpayer-friendly reforms.
Illinoisans couldn’t seem to catch a break in 2018.
The year began as last year ended – with troubling news for taxpayers. Just one month after the U.S. Census Bureau demoted the state from fifth- to sixth-largest state in the nation, a report in January from the Illinois Policy Institute found property taxes had been growing at a rate six times faster than household incomes for nearly a decade. Illinoisans moving to other states have driven Illinois’ population loss for years, according to Census data. Why were they fleeing?
Illinoisans cited high taxes as the No. 1 reason they wanted to leave the state, according to polling from the Paul Simon Public Policy Institute. Unfortunately, state leaders have failed to listen or provide taxpayers with relief. Worse, many state lawmakers this year pledged their support for a progressive state income tax, which would pave the way for tax hikes on the middle class.
In 2018, state officeholders delivered Illinoisans the same policy failures they’ve been re-gifting for years. Instead, here’s a taxpayer-friendly wish list of reforms for lawmakers to keep handy in 2019.
No. 1: Pension reform
Illinoisans shoulder among the highest property tax burdens in the nation. The main cause? Unsustainable growth in pension costs for government workers. Pension reform should be the highest priority for state lawmakers in January when they return to Springfield.
The Illinois Supreme Court’s strict interpretation of the state constitution’s pension clause has driven the court to strike down even the most modest pension reforms. Consequently, it is a moral imperative for state lawmakers to muster the political will to amend the Illinois Constitution, as states such as Arizona have done and as Chicago’s mayor has recommended.
A sensible constitutional amendment would protect benefits that have already been earned by government workers, while allowing for adjustments to the future growth in benefits that have not yet been earned. Moreover, the state should enroll all future government workers into personal, 401(k)-style retirement accounts that offer more security and predictability for workers’ retirement funds.
No. 2: Honor the state’s balanced budget requirement
Illinois holds the distinction of worst credit rating in the nation. It’s hardly a mystery why: The Prairie State has not passed a truly balanced budget since 2001, despite the state constitution’s requirement to do so. The state’s fiscal condition only worsened between 2015 and 2017, when for two years the state failed to pass a budget at all.
When the General Assembly passed its budget for fiscal year 2019, lawmakers declared a bipartisan victory. But that spending plan remains out of balance by more than $1 billion, and it does nothing to address the state’s severe, structural debts.
Springfield’s budgeting process is broken. Illinois lawmakers could change that by renewing their commitment to the constitution’s balanced budget requirement. Re-establishing a sound and transparent budgeting process would be a significant step toward restoring taxpayers’ confidence in their state.
No. 3: A constitutional spending cap amendment
State lawmakers gave Illinoisans cause for optimism when the Illinois Policy Institute’s proposed constitutional spending cap found support on both sides of the aisle. On April 26, state Sens. Tom Cullerton, D-Villa Park, and Michael Connelly, R-Naperville, held a press conference endorsing a spending cap amendment to the Illinois Constitution.
State spending grew 25 percent faster than Illinoisans’ personal incomes between 2005 and 2015. And when spending grows faster than taxpayers’ ability to pay, tax hikes and debt come next.
A smart constitutional spending cap would limit the growth in state spending by tying it to the rate of growth in the economy, allowing the state to rehabilitate its finances without the need for future tax hikes. Moreover, it would provide long-term certainty about the state’s economic climate, making the state a more desirable destination for families and businesses.
No. 4: School district consolidation
Another reason for Illinoisans’ daunting property tax bills is the record number of local government bodies they’re supporting. Illinois, for example, is home to nearly 860 school districts, fifth-highest in the nation. Meanwhile, those districts serve the fifth-lowest number of students per district at 2,400, which suggests Illinois taxpayers are paying for an overabundance of school districts.
That comes at no small cost. School districts in Illinois consume nearly two-thirds of all property taxes collected by local governments. Unfortunately, Illinois ranks 8th in the nation in administrative spending as a percentage of education spending – meaning a substantial chunk of those property tax dollars never reach the classroom. Instead, a large portion goes to pay for administration and support functions.
By consolidating school districts, overhead would drop and allow local leaders to take immediate steps toward property tax relief.
No. 5: Local government consolidation
In addition to too many school districts, Illinois is overrun with local government. At nearly 7,000 of them, Illinois is draped in more layers of government than any other state in the nation. These layers include townships, park districts, mosquito abatement districts and more.
Many of these government units overlap, in many cases performing the same services. In addition to excess taxpayer costs, too much government provides refuge for waste and abuse: The McHenry County state’s attorney opened criminal investigations into three separate townships in the county this year. Following one of the investigations, the state’s attorney described the “flawed” township form of government in a report as hotbeds of “incompetence, guile and impropriety.”
Either Gov. Bruce Rauner or Gov.-elect J.B. Pritzker should allow McHenry County taxpayers to rid their communities of such abuse by signing into law House Bill 4637. That bill would empower county residents to more easily dissolve their townships at the ballot box. Additionally, state lawmakers should extend those consolidation powers to all Illinois taxpayers.
No. 6: Reject a progressive income tax
Springfield gave taxpayers yet another cause for concern in May when Illinois House members passed a resolution affirming their support for a progressive state income tax. While the resolution was nonbinding, it offered a discouraging picture of Springfield’s policy priorities.
Illinois’ constitutionally protected flat income tax is one of the state’s few competitive advantages – and one of the only protections for residents and businesses braving its punishing tax climate.
Lawmakers are attracted to the progressive tax because it plays well politically, and can often be sold as a “tax on the rich.” But progressive tax proposals too often serve as a Trojan horse for tax hikes on the middle class. State Rep. Robert Martwick, D-Chicago, introduced a progressive tax bill this year that would raise taxes on Illinoisans earning as little as $17,300 a year. Across the nation, higher tax rates have crept into lower income levels under progressive income tax structures.
While Pritzker made a progressive tax a pillar of his gubernatorial campaign, he has more recently distanced himself from such a proposal. The incoming governor would be wise to keep a progressive tax off the table.
No. 7: Prison sentencing reform
Illinois has taken bold steps in the right direction on criminal justice in recent years. A series of bills signed into law by Gov. Bruce Rauner in 2017 made it easier for nonviolent ex-offenders to successfully re-enter their communities and prevented Illinoisans from being targeted under the controversial practice of civil asset forfeiture.
But there’s more to be done: A July report released by the Illinois Sentencing Policy Advisory Council projects that the state’s recidivism rate – the rate at which ex-offenders reoffend and return to prison – will come at a cost of more than $13 billion during the next five years.
Enabling ex-offenders to re-enter the workforce after having paid their debts to society is fundamental to reducing Illinois’ recidivism rate. Reducing burdensome barriers to employment, such as occupational licensing without due process, and limiting risks posed to prospective employers, such as negligent-hiring liability, would help put ex-offenders to work and limit the chances they would again turn to crime.
No. 8: Simplify property assessment process
In addition to high property tax bills, Illinoisans suffer from a property assessment system that is needlessly complicated. The system can hide errors and inaccuracies on residents’ property tax bills, subjecting them to unfair taxes. An Illinois Policy Institute report this year found while the degree of property tax inefficiencies varies across counties, the needlessly complex appraisal system is universal.
Taxpayers deserve a property tax system they can understand. Simplifying the state’s assessment process would foster fairness and accuracy in property appraisals – and empower Illinoisans to fix property tax mistakes.
No. 9: Mapmaking reform
Elections require voters to choose their representatives. But Illinois representatives too often choose their voters. Through redistricting – the re-drawing of maps showing the districts lawmakers represent – politicians can routinely manipulate electoral odds in their favor. This is because state law virtually guarantees partisan mapmaking. The result? Illinois House Speaker Madigan has drawn Illinois’ legislative map three out of the past four decades, following the U.S. Census.
Unsurprisingly, incumbents such as Madigan have greeted reform with fierce opposition. The system’s effects are painfully clear: More than 60 percent of Illinois’ state legislative races in 2016 went uncontested. Illinoisans deserve an independent, non-political redistricting commission.
No. 10: Roll back 2017 income tax hike
Prior to the state’s last income tax hike, Illinoisans were already among the highest taxed in the nation. But when Illinois lawmakers overturned Rauner’s veto of the proposed budget in 2017, lawmakers heaped a 32 percent income tax hike onto that burden. Increasing the personal rate to 4.95 percent from 3.75 percent, and the corporate rate to 7 percent from 5.25 percent, the measure won the distinction of the largest permanent tax hike in state history.
The Illinois Policy Institute estimates Springfield’s previous income tax hike in 2011 cost the state nearly $56 billion in economic output and more than 9,000 jobs. And that rate already had been driving Illinoisans across state lines.
Springfield’s taxation habits are a dead end. Without spending reforms, and with higher taxes on a shrinking tax base, the ugly conclusion is a slower economy with fewer jobs and more families leaving Illinois. Rolling back the income tax hike is an urgent necessity.
No. 11: Protect school choice
With the passage of Senate Bill 1947 in 2017, scholastic opportunities for underprivileged students were no longer determined by their ZIP codes. The education funding bill included the Invest in Kids Act, a tax credit program to give low-income households scholarships to private schools.
Scholarships are limited to students whose family incomes are within 300 percent of the federal poverty line, or less than $75,300 for a family of four in 2018. But the program prioritizes the neediest students, offering the largest scholarships to those within 185 percent of the poverty line, or less than $46,435 for that family of four, as well as those who live in low-performing school districts.
If Gov.-elect Pritzker sticks to his stated plans, those students may soon have this opportunity ripped away from them. “We should as soon as possible do away with it,” Pritzker said of the program in April.
For the majority of Illinois families, schools are determined not by the needs of students, but by the location of their homes. Well-heeled families such as the Pritzkers have little to lose under the status quo, but the incoming governor should consider what he will take from needy students before he attacks the Invest in Kids Act.
No. 12: New House rules
Under the House rules in Illinois, the House speaker assigns committee chair positions and the stipends that come with them, can substitute committee members, dictates when a bill will be called for a vote, and decides what bills make it to a vote in the first place.
Taken together, the powers enjoyed by the House speaker in Illinois’ legislative process are unparalleled in the nation.
Further, the possibility of losing a leadership appointment and stipend creates a strong incentive for state lawmakers to side with political leadership, rather than the constituents they’re elected to represent.
The Illinois House should take a note from other states and change its legislative rules to diminish the control of the House speaker over the legislative process, and over the fate of Illinoisans.