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Advocacy Group Says Rauner Can Avoid Painful Cuts With Revenue Options

By aaroncynic in News on May 7, 2015 1:50PM

While Illinois Governor Bruce Rauner is busy pitching his idea to shake up the budget by shaking out money from the pockets of the state’s poorest, a children’s advocacy group says a focus on revenue is the key to shoring up the $6 billion deficit.

Voices for Illinois Children released a report Tuesday highlighting several options that could help fix Illinois’ budget woes that don’t rely on the millions of dollars in cuts to social services, local municipalities and other state programs Rauner has touted.

“If the goal is to create a stronger future for Illinois, the worst thing we can do is weaken the infrastructure of public services that a strong economy needs, like education, health care, transportation and public safety,” said David Lloyd, Director of the Fiscal Policy Center at Voices for Illinois Children. “Relying on cuts to balance our budget jeopardizes the investments we’ve already made and ruins the foundation for future prosperity.”

Most of the $6 billion budget shortfall the state faces was created when the income tax rate rolled back from the temporary 5 percent flat rate to a flat rate of 3.75 percent at the beginning of the year. The corporate tax rate also rolled back from 7 to 5.25 percent. To solve the problem, Rauner has called for massive cuts, already slicing $300 million from transit, social services and other programs, including college funding and domestic violence shelters.

“Governor Rauner and legislators are not helpless bystanders,” said Lloyd. “They can choose revenue to avoid cuts that harm Illinois’ families, communities and the economy.”

The plan proposed by Voices for Illinois Children suggests a variety of mostly tax-based options, including personal, corporate, sales and luxury options. For every .25 percent restored to the personal income tax rate, the state could generate $1 billion. By restoring the corporate rate, the state could generate between $330 and $700 million. Eliminating tax breaks for businesses investing in other states and capturing income held in offshore tax havens would generate another $200 million. Modeling the Illinois sales tax after Iowa’s, which means taxing many more services, could generate more than $4 billion, the report says.

State Senator Pat McGuire told the State Journal Register that Illinois could afford the Iowa sales tax model:

"I’m not asking us to be like Massachusetts. I’m not asking us to be like California. Iowa. How crazy can Iowa be? We need to catch up with the neighboring states to provide services to all Illinoisans who need them."

In addition to those measures, the report also suggests moving to a “multi-tiered” income tax system, as well as exploring retirement tax options.

Predictably, many of the group’s recommendations were dismissed by anti-tax advocates. David From of the Koch Brothers-funded group Americans For Prosperity, told WUIS:

“Everybody just seems to kind of forget that it's real people who have to pay this bill. It is just kind of frustrating to me that ... politicians who've been running this state have made promises that we can't keep. They've committed taxpayer dollars irresponsibly."

Meanwhile, Governor Rauner took to the floor of City Hall in Chicago yesterday, the first time a sitting Governor has addressed the body, to sell his "turnaround" plan. In a short speech, he told the Council he hoped Chicago would "be his partner" in what is a pro-business, pro-austerity and anti-union agenda. "For Chicago to get what it wants, Illinois must get what it needs," said Rauner, according to the Chicago Tribune. Rauner also tried to play up the divide between Chicago and the rest of the state, saying the most common thing he heard from people south of Interstate 80 to solve Illinois' problems would be to "secede from Chicago."

But before opponents don tricorn hats and set up camp on the Capitol lawn to tell legislators they’re taxed enough already, it’s noteworthy to remember that at present, Illinois only taxes 17 services, whereas Iowa taxes 94. More modestly, the national average is at 56. Meanwhile, Illinois has one of the lowest rates of the 44 states that tax income and one of only a handful that have a flat tax rather than a multi-tiered or graduated income tax structure. Additionally, the state loses millions every year thanks to loopholes corporations exploit to avoid paying taxes in Illinois.

State Representative Mike Smiddy told WUIS that exploring tax increases is better than budget cuts that will have harsh effects on middle and lower/working class families:

"That's the two choices that we have here: cutting social services and struggling to allow families to meet their needs or looking at a revenue increase of some type to ensure that we can move Illinois forward to be a productive state."