We here at the Chicagoist offices follow the news so you don't have to. Sometimes that means sifting through press releases, reading other news outlets, or keeping our ear to the ground. One thing we've been keeping an eye on here is the "education situation" in this state, with all its sick twists and turns. Tax "reform" and education have been quite the issue this winter, with Governor Blagojevich promising not to raise taxes, while also promising to figure out how to fund education in the state at a deeper level (to stave off a gubernatorial challenge from State Senator Rev. James Meeks).
Maybe that's why Blagojevich is planning on rewriting the state's corporate income tax in the most sweeping way since the 1970's. The governor's office is putting final touches on a bill that would scrap the state's current corporate income tax in favor of a plan to collect a levy on the gross receipts of all businesses. Crain's Chicago Business notes that 37 of the “Fortune 100” companies didn’t pay any income tax in 2004, "despite average Illinois sales that year of more than a billion dollars." But the education angle is what makes this story so much more interesting. Blagojevich is under quite a bit of pressure both to relieve taxes in the state and to find a better source of funding for education here. Daley, Madigan, Meeks, Emil Jones and others have all supported HB/SB 750, which includes what has come to be known as the tax-swap. This piece of legislation would increase the income tax rate from 3 percent to 5 percent, and reduce school property taxes by about 30 percent. This would effectively bolster aid to public schools while eliminating reliance on local property taxes that create disparities between wealthy and poor school districts. Blagojevich has vowed to veto this bill should it come to his desk.
And here is where it starts to get interesting. Blagojevich quietly moved his combined State of the State and budget proposal address to March 7. And yesterday the Illinois Board of Education released its Fiscal Year 2008 budget (you can read the PDF here), and is asking for an additional $800 million over this year's budget. You can bet that they wouldn't be asking for that kind of increase without getting the blessing from the governor's office first. G-Rod must feel pretty confident that he will get his new tax plan this session, and be able to beat back the aforementioned power-brokers, wihtout appearing to raise taxes on "regular people" and finding even more money for school children. We don't think that selling the lottery is going to happen; that idea will be dead in the water before it even hits the Statehouse. And we're pretty sure Blago knows this. With so many power hitters lined up for reform, and the monetary pressure building, it may be easier to try to stick the tax bill to businesses than to institute real tax equity in Illinois. At least for now.
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Thanks for sifting through the tedious details, making sense of it and putting it in layman's terms - so we don't have to!
I think the gross receipts tax is good idea, but I'm not entirely convinced.
I don't think that the 3% tax should be increased for most people, but I would support an increase for single people making over $100k, and childless couples over $200k, and families making over $250k. Say, 6% for high income people in this state. The additional funds then get routed to low income school districts (CPS, poor suburbs, East St Louis, poor downstate districts).
So, when you are making 100 grand a year and you get that dollar raise, your taxes double?
Anyway, our funding method is out of whack, too dependent on property taxes, but my great misgiving is over distrust of the school districts to actually cut property taxes in return for more income tax cash. They simply won't tackle expenses. In Oak Park, where I live, the school district has raised its share of property taxes 57 percent in five years. It uses legal tricks to get more out of a referendum than it said it would to voters, and it constantly twists facts about the increases in spending. I don't trust them; I am afraid they'll just take the extra cash and carry on as usual.
So, when you are making 100 grand a year and you get that dollar raise, your taxes double?
Anyway, our funding method is out of whack, too dependent on property taxes, but my great misgiving is over distrust of whether the school districts actually would cut property taxes in return for more income tax cash. They simply won't tackle expenses. In Oak Park, where I live, the school district has raised its share of property taxes 57 percent in five years. It uses legal tricks to get more out of a referendum than it said it would to voters, and it constantly twists facts about the increases in spending. I don't trust them; I am afraid they'll just take the extra cash and carry on as usual.
So, when you are making 100 grand a year and you get that dollar raise, your taxes double?
Anyway, our funding method is out of whack, too dependent on property taxes, but my great misgiving is over distrust of the school districts to actually cut property taxes in return for more income tax cash. They simply won't tackle expenses. In Oak Park, where I live, the school district has raised its share of property taxes 57 percent in five years. It uses legal tricks to get more out of a referendum than it said it would to voters, and it constantly twists facts about the increases in spending. I don't trust them; I am afraid they'll just take the extra cash and carry on as usual.
Sorry about multiple postings! This posting tool kept telling me it wasn't working, so I didn't know it was going up, and I tried several times.
"Real funding equity"
Just so you know...
HB750 is primarily a property tax relief bill, not an education funding bill.
The money would go to raise the "foundation level" - the minimum amount of funding per student - to about $5,900 a year, from $5,334 now.
You think that meager increase will inspire any local governments to drop their property tax for schools? I don't think so.
The majority of the money - $3 billion - will be taking money from individuals' paychecks to give rebates to mostly wealthy homeowners and businesses for their property taxes.
The Governor's previously stated education plan was to raise $1 - $1.5 billion a year through the lottery lease. That's about as much as HB750 would generate for education. It would raise the foundation level to, I think $5,750 per student.
Now, I don't know if the education money is going to come from the lottery or the Gross Receipts Tax, but if it is at the same level as previously proposed, that is a MUCH better deal that the property tax giveaway to businesses known as HB750.
If HB750 was REALLY a tax swap, replacing all property tax money for education with state income tax money, distributed evenly, that would be something else to consider. But it isn't.
I am sick and tired of HB750 advocates claiming it is the liberal and just response to funding inequities. It's a false god.
Ok... off my soapbox now.
"Real funding equity"
Just so you know...
HB750 is primarily a property tax relief bill, not an education funding bill.
The money would go to raise the "foundation level" - the minimum amount of funding per student - to about $5,900 a year, from $5,334 now.
You think that meager increase will inspire any local governments to drop their property tax for schools? I don't think so.
The majority of the money - $3 billion - will be taking money from individuals' paychecks to give rebates to mostly wealthy homeowners and businesses for their property taxes.
The Governor's previously stated education plan was to raise $1 - $1.5 billion a year through the lottery lease. That's about as much as HB750 would generate for education. It would raise the foundation level to, I think $5,750 per student.
Now, I don't know if the education money is going to come from the lottery or the Gross Receipts Tax, but if it is at the same level as previously proposed, that is a MUCH better deal that the property tax giveaway to businesses known as HB750.
If HB750 was REALLY a tax swap, replacing all property tax money for education with state income tax money, distributed evenly, that would be something else to consider. But it isn't.
I am sick and tired of HB750 advocates claiming it is the liberal and just response to funding inequities. It's a false god.
Ok... off my soapbox now.
Renters:
Do you think your landlord will forego a property tax windfall and reduce your rent to "compensate" for your 2% income tax increase? I don't think so.
This idea is bad all around.
Re: renters, you are correct, they will not reduce rents. They will have higher income taxes to pay that may be more than any property tax relief anyway, so renters get completely screwed with HB750.
And HB750 isn't much of a property tax relief bill either. $2.4 billion is rebated to the school districts (not property owners) which will range from 8% to 25% (not 30%) off the school only portion of property taxes. With the 67% personal corporate income tax increase, the new 6.25% sales tax increase on services and new state income tax on retirement income, HB/SB 750 would bring in $5 to $7 billion in new money after the property tax rebates and new Family Tax Credit, depending on whose estimates you believe. The IL State Board of Education is only asking for $800 million more this year. Go figure why they want more than that.
One thing no one pushing HB/SB 750 will talk about is the fact that HB/SB 750 does absolutely nothing to improve the quality of education. No performance based pay, no accountability for bad performance, no end or reform to tenure that has led to an average of only two teachers fired in Illinois each year for poor performance, no increased public reporting of spending, no elimination of unnecessary districts, etc. HB/SB750 only involves tax increases without doing a thing to actually improve how education is delivered.
As for the gross receipts tax, it's a horrible idea. Michigan just dumped their's because it was a cause to their high unemployment rates and the auto industry leaving the state.
There is one factor that correlates to education quality more than spending per student, class sizes, building upkeep, etc. and that is economic conditions. More children live in poverty in Illinois now than 4 years ago. Even more will live in poverty if we increase taxes. If you want kids to do better in school you have to lift them out of poverty first, and tax increases have the opposite effect. Spending more per student does not equal better results as much as improved economic conditions leads to better results.
Don't fall for the smoke screen of funding inequality, or poor teachers, or we can afoord higher taxes. When they want to start talking about ending tenure and being able to get rid of bad teachers, performance based pay, consolidating school districts and administration, and total openess of how they spend their money, then I will believe they are serious about improving education. Don't believe me?
"Steve Jobs has guts — enough guts to speak his mind about what he thinks is wrong with public education even at the risk of harming his business interests.
In a speech on Friday, the chief executive officer of Apple and Disney honcho declared: “I believe that what’s wrong with our schools in this nation is that they have become unionized in the worst possible way.”
The problem with unionization, Mr. Jobs argued, is that it has constrained schools from attracting and retaining the best teachers and from dismissing the less effective ones. This, in turn, deters quality people from seeking to become principals and superintendents. “What kind of person could you get to run a small business if you told them that when they came in they couldn’t get rid of people that they thought weren’t any good? Not really great ones because if you’re really smart you go, ‘I can’t win,’” Mr. Jobs said. He concluded by saying, “This unionization and lifetime employment of K-12 teachers is off-the-charts crazy.”
This tax proposal will dramatically impact "regular people." Do you think your small business owner, your local grocer, your tax advisor can simply absorb a tax on gross revenue? Can you imagine the impact on a high-gross, low-profit company like a contractor or builder? This "corporate tax" will be passed along to every consumer. In this sense, it's amazingly regressive. When milk goes to $5 a gallon you'll know who to thank.