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Fiscal discipline better than ‘fair tax’

Government needs to live within its means

Published: Wednesday, April 30, 2014 1:15 a.m. CDT

Within the next few days, the Illinois General Assembly will decide whether voters will get a chance to change the state’s income tax policy.

At question is the so-called “fair tax,” being promoted by some Democrats, including state Sen. Don Harmon, D-Oak Park, and state Rep. Christian L. Mitchell, D-Chicago. The legislation to put a Constitutional amendment on the ballot basically needs to be approved by May 1, which gives those in favor of a fair tax a handful of session days to get the measure approved by the necessary three-fifths majority in both the House and Senate.

That amendment would simply change the constitution from its current provision for a flat tax – everyone pays the same rate – to a system where rates could be set for various income levels.

Harmon and Mitchell have introduced legislation that, if the amendment is approved by voters in November, would set those rates. There’s no guarantee, however, that higher taxes wouldn’t be enacted by the General Assembly.

Harmon and Mitchell say their proposal is “revenue neutral,” which means that the state will receive roughly the same amount in tax revenue beginning in January as it did the year before. They also claim that their plan is a tax cut for most Illinois residents.

That’s not entirely accurate. The states’ “temporary” income tax increases are set to expire on Jan. 1, so if the General Assembly does nothing, the individual rate will fall from 5 to 3.75 percent. The fair tax proponents say their plan will be a decrease from what Illinois residents currently pay, but will be an increase if the tax rates are allowed to sunset.

Gov. Pat Quinnhas said he wants to make the temporary tax [rates] permanent, but retain the state’s flat tax, where everyone pays the same rate.

The fair tax supporters say their plan is fair because those people earning more money would pay a higher percentage.

That’s true, if rates are the only consideration. Under the flat tax, however, higher wage earners already pay more taxes in actual dollars than lower wage earners.

The fair tax could also be more easily manipulated. It’s much easier to pass a tax increase on a few income levels, than push through an increase on every wage earner.

Despite the end-of-the-world scenarios being pushed by the Quinn administration, the state can operate if the tax rates are allowed to roll back. What’s needed is fiscal discipline to spend less money.

Illinois doesn’t need a new tax system, but political leadership that understands living within its means.

 

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