Kadner: Cut income taxes for all or no one
By Phil Kadner email@example.com January 30, 2014 7:58PM
Illinois Speaker of the House Michael Madigan (left), D-Chicago, looks on Wednesday as Gov. Pat Quinn delivers the State of the State Address in Springfield. | AP photo
Updated: March 3, 2014 4:52PM
It seems to me that Illinois House Speaker Michael Madigan just announced an income tax break for all of us next year.
On Thursday, Madigan, D-Chicago, actually called on lawmakers to take a hard look at cutting the corporate income tax rate from
7 percent to 3.5 percent this year.
Some analysts are saying that’s just a political tactic to ward off attacks by Republican gubernatorial candidates who claim the state’s tax policies are forcing businesses to leave Illinois and keeping unemployment high.
Whether Madigan is serious or not, his announcement is going to make it very hard for any Democrat to call for an extension of the temporary personal income tax hike that’s set to expire at the end of the year.
How can you give corporations in Illinois a $500 million to $750 million tax cut this year ($1.5 billion over two years) and then tell individual taxpayers they have to pick up the tab?
Regular readers of this column know that I’ve been warning for more than a year about the state’s dire financial situation and, unlike many in the news media, I wasn’t talking about underfinanced pension funds. This state spends billions of dollars more than it takes in each year, even with that temporary income tax increase.
When that temporary individual tax hike begins to expire next January, Illinois will lose an estimated $2 billion for the final six months of the 2015 fiscal year, which begins July 1 and runs through June 2015. The state will lose an additional $4 billion more in the 2016 fiscal year.
Logic suggests that the state can’t afford to let that higher income tax expire as scheduled. But logic has nothing to do with politics or, apparently, running the state government.
Madigan claims that the corporate income tax cut is needed to generate job growth in Illinois.
He apparently has just discovered what Republicans have been saying for decades: that higher taxes hurt the economy by discouraging business growth.
There’s an argument to be made for that. On the other hand, there’s the reality of state finances.
Madigan and Gov. Pat Quinn, among others, have been bragging about the more than $100 billion that Illinois will save over the next 20 to 30 years due to the pension reform plan passed last year.
But it now appears those cost savings were overestimated.
In addition, unions are filing lawsuits to block the pension deal, claiming that it violates a section of the state Constitution that says public pensions are a “contractual relationship” and those benefits that cannot be reduced or impaired.
Many legal experts say those lawsuits have merit. So there’s a chance the pension reform law will be ruled invalid by the Illinois Supreme Court.
Apparently, none of this worries the politicians who run Illinois. And they’re pretty smart guys.
After all, for decades they simply refused to make payments into the state’s pension systems, using the money instead to hand out state contracts to campaign contributors, friends and relatives.
The legislators figured that when the bill for the five pension funds came due, they would be out of office and cashing their retirement checks.
That’s pretty much what happened.
But Madigan was in the House back then and has been the powerful speaker for many years, and now he’s saying that Illinois, in deep debt, needs to cut corporate taxes to improve its business climate.
Fine and dandy, but don’t ask me to pay the bill for that generosity.
For 30 years or more, Illinois residents have been paying higher property tax bills because the state refused to adequately finance public education, even as it was spending all of that pension money that belonged to future retirees.
Instead of blaming the lawmakers in Springfield, most Illinois residents have pointed the finger of blame at local school boards.
But it’s not just education funding that has been hurt in Illinois.
The Center for Tax and Budget Accountability says Illinois ranks near the bottom of the nation in spending on other core services, such as health care, social services and public safety. During the past 10 years, overall spending on services in Illinois has declined in real terms after adjusting for inflation, the center contends.
And that’s after legislators misappropriated the pension fund money in several of those years and raised the income tax three years ago.
It should be pointed out that the corporate income tax rate, like the personal tax rate, already is scheduled to drop in January 2015. The corporate rate will decline from 7 percent to 5.25 percent, but Madigan is proposing a bigger and swifter break for companies.
Anyone following this year’s election campaign knows why. Unemployment, the lack of business growth and the state’s terrible financial situation have become key issues, and Democrats are taking a beating.
So maybe Madigan is just posturing. Maybe he just wants to appeal to independent voters who might be thinking of backing a Republican in November.
I don’t really care what his motivation or intent is at this point.
Madigan, who’s also the state Democratic Party chairman, has said corporations deserve a tax break. No matter how that plays out, I don’t want to hear him say anything about extending the personal income tax hike for the good of the state.
As for Democratic legislators, who repeatedly have supported Madigan for speaker of the House, they better understand what this means to voters in November. No switching the debate to a graduated income tax now.
I’ve tried to be a voice of reason, but unlike our elected officials, I can’t tell working stiffs to give more to the state when corporations and lawmakers play them for suckers.
Give us all a tax break now.
As for the financial consequences, hey, that’s never been a concern to political leaders in Illinois.