"Revenue Neutral" and the Proposed Fair Tax Amendment

The Fair Tax in Illinois and the “Revenue Neutral” Position

Two Joint Resolutions are still alive in the House and the Senate of the General Assembly despite the extremely short time and the seeming difficulty to raise enough votes – especially in the House – to keep the movement for a Fair Tax succeeding.  In a worst-case scenario, Speaker Madigan, the master of vote collection, will fall short of collecting the necessary votes in the House and the Resolution may disappear in another week and a half. 

Senator Don Harmon

If that were sadly to happen, the discussion could re-appear in 2016.  And would.  The appeal to a fair tax is worth a Joint Resolution now, and the emphatic discussion presented by A Better Illinois and sponsor Senator Don Harmon is as important economically as it will be twice as important if it must be reborn in 2016.

By the way, in case you agree, you can contact your Representative and Senator regarding HJRCA 49 or SJRCA40 NOW.

Of course “taxes” have become the overworked term of the last few months.  Governor Quinn, in his budget speech of March, has called for the fiscal necessity of a continuation of the “temporary” tax increase of 2011, and the Republicans have called foul.  Speaker Madigan, for reasons only comprehensible to the Speaker, piled on with a declaration to consider a millionaire tax, while providing a tax break for major businesses.  Perhaps this was cover for the Governor’s proposal, but only the Speaker would know.  One of those ideas has been withdrawn, and the other – the business relief tax cut – is part of the walking dead at this point.  Would-be Governor Bruce Rauner has yet to offer his promised budget (the pace of the 30 Committee Big Business group on Illinois Economics he promised?), but he too has been strident in denouncing the Governor’s appeal to maintain the current tax increase.

And, of course, lost in all of this was the most sensible and most enduring fix possible for the State of Illinois: The Fair Tax.

I noted the other day that the latest epithet connected to the radio ads for a fair tax is calling it a “Fair Tax Cut.”  Nice idea for good reasons.

One of the most bloviated and blustering opponents of the Fair Tax” has been Rep. David McSweeney of Barrington Hills.  If the antiquated flat tax were an old, rusting and misfiring car, McSweeney would drive that inefficient piece of metal until , well, until forever.  Forget inventive ideas of safety or mileage.  Anything new-fangled like key start or radio.  For Rep. McSweeney innovation is the enemy.  Fairness is Satan.

And, this brings us back to Senator Harmon’s example of how a Fair Tax might actually work in Illinois.  It is important to note that Harmon’s example is just that, not an actual design that is in any way part of the proposal within the Joint Resolutions.  In fact, if an Amendment were to be acceptable to the voting public of Illinois, it would ultimately require a specialized group of legislators from both houses to actually determine an agreed-upon “Fair Tax” schedule.  Senator Harmon’s proposal is just that – a PROPOSAL.

More than one Luddite

Of course, once you roll out a new vehicle out in front of a Luddite like Rep. McSweeney, he’ll have plenty of sudden-conjured reasons to go berserk.  And, of course, he does…nonsensically.  Following rule 1 – 10 in the ALEC playbook, McSweeney denounces the proposal as being “bad for taxpayers because.”  These vehement protests, often delivered with the same scoffing and authoritative emptiness of a Rush Limbaugh monologue, “It’s a tax increase, It’s a tax increase, It’s a tax increase, It’s a tax increase, It’s a tax increase, etc.”

Not surprisingly, Senator Harmon’s plan actually demonstrates that the “Fair Tax” will instead help by providing monetary relief to 94% of Illinoisans, and many services due to be cut in 2016 might be saved. (click here to learn about the proposal)

And for some of us, the plan may seem too moderate, but we also need to remember it is a starting point, a proposal.  In fact, the plan as proposed by the Senator does not deliver on the many millions and even billions that were once provided in comparable charts run by the CTBA (Chicago Tax & Budget Accountability) on the desirous effects of a graduated tax for Illinois.  Comparisons states like Iowa provided billions more in potential tax revenue. 

This unassertive proposal brings in about $23 million less than a current flat tax rate.  Why the lesser amount?

Senator Harmon, when asked, explained his main reasons for the modest proposal were at least two-fold.  First, it quite simply demonstrated and provided the kind of help a financially strapped citizen in Illinois could receive unless he was making well over $200,000 annually (a bit more than even an extremely argumentative opponent like McSweeney can use to call Middle Class).   Likewise, a modest proposal was more “Revenue Neutral,” or it came closest to what might be earned under a current flat tax structure, but it would still demonstrate significantly the benefits to the greater percentage of Illinois workers who would benefit from such a change.  And, let’s not forget the greater amount of spending that would come with such a windfall in the pockets of those who must spend (not invest) to survive.  We all would benefit.

Let’s not forget that a fair or graduated tax system also remains more responsive to increased wages and growth over time.  Just one more reasons we should be having this conversation now, even if perhaps Speaker Madigan may want us to have it instead in 2016. 

Drives fine…why change it?

Regardless, the conversation is an important one, and even if it is put on ice by the subterranean powers in the General Assembly who have pre-determined what will and what will not be on this year’s schedule, it is one we all should have with our elected legislators. 

If they’re not thinking about it now, they’re going to need to very soon.  There’s only so much money in Springfield – and only so much time.  The old vehicle is dying.