State senators stave off spending reform, test tax hikes instead

February 16, 2017
By Austin Berg

Illinois’ combined state and average local sales tax rate is the highest in the Midwest.

Every week, there seems to be news of yet another massive tax hike out of Springfield.

First came the multibillion-dollar income tax hike.

Then a statewide tax on sugary drinks.

Then, on top of all that, a new payroll tax on the “privilege of doing business” in Illinois.

Yes, that’s a real quote from the bill.

Heavy resistance to the “privilege” tax sent senators back to the drawing board. Now they’re busy trying to see what sticks to the wall. Their newest invention: Adding a sales tax on services and hiking the sales tax on food and drugs.

If only these senators applied the same ingenuity in getting their spending in order as they did when trying to take Illinoisans’ money.

If passed, the Senate plan would reduce the overall sales tax rate to 5.75 percent from 6.25 percent. But at the same time, the state would apply this new rate to items such as food, drugs and medical supplies, which currently come with a state sales tax of only 1 percent.

That’s a 475 percent sales tax hike on essential items too many Illinois families can’t afford already.

Services such as car repairs, landscaping and cable TV would also be taxed at the new 5.75 percent rate. Services in Illinois are currently exempt from the sales tax.

Chicago is home to the highest sales tax among major U.S. cities. And Illinois’ combined state and average local sales tax rate is the highest in the Midwest, according to a recent report from the nonpartisan Tax Foundation.

In addition, 20 units of local government across the state raised sales taxes at the start of 2017.

Enough is enough. Here’s what lawmakers could be pursuing instead of hiking taxes on food, drugs and services:

Before tax hikes, consolidate school districts. Nearly 45 percent of Illinois districts serve just one or two actual schools. Cutting the number of school districts – not schools – in half could save up to $170 million annually and more than $3 billion in pension costs over the next 30 years.

Before tax hikes, end the bloat at Illinois’ public universities. More than half of every state dollar for higher education goes not to operations, but to retirement costs. Over half of Illinois’ 2,465 university administrators received a base salary of $100,000 or more in 2015. How about a 10 percent cut in higher education payrolls, saving $500 million?

Before tax hikes, end pension pickups. Nearly two-thirds of all school districts – and by extension, taxpayers – pick up some or all of each teacher’s required pension contribution. Good teachers should be paid well. But this perk leads to the absurd circumstance where career teachers can earn a pension worth millions while contributing virtually nothing to their retirement. It’s not fair. Ending this practice would save school districts $375 million.

Before tax hikes, eliminate the sick day perk that spikes pension costs. Teachers in Illinois can cash in two years’ worth of sick days toward the value of their pensions. This perk will cost Illinois taxpayers $3.4 billion over the next 30 years.

State lawmakers shouldn’t hike the cost of basic goods and services while commonsense reforms go unnoticed.

Yes, Illinois should modernize its tax code to adapt to the changing economy. Illinois began charging a sales tax in the early 20th century when most of the economy was in the goods sector, not services. That’s changed. Today, most sales are of services.

So, how about this for compromise? Broaden the sales tax, but eliminate Illinois’ personal and corporate income taxes. That’s a real bargain that doesn’t take taxpayers for a ride.

But the Senate plan pursues the opposite. It whacks low-income families with higher medical and grocery bills, and hits taxpayers with a higher income tax to boot.

That’s not a compromise. It’s a raid.

TAGS: budget, Illinois Senate