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* From the Illinois Policy Institute…
[Innovation Illinois’ Elizabeth Austin] also incorrectly described Illinois as having a “regressive flat income tax rate.” This is a contradiction in terms — a tax rate cannot be both regressive and flat. Since Illinois’ income tax rate is flat, everyone pays the same rate on all taxable income.
They can’t really be that clueless, can they?
A regressive tax is generally a tax that is applied uniformly. This means that it hits lower-income individuals harder.
posted by Rich Miller
Thursday, Nov 5, 15 @ 9:31 am
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“They can’t really be that c̶l̶u̶e̶l̶e̶s̶s̶ dishonest, can they?”
Yes. Repeatedly.
– MrJM
Comment by @MisterJayEm Thursday, Nov 5, 15 @ 9:35 am
How cute, Ms. Austin is playing “tax expert”.
Comment by Oswego Willy Thursday, Nov 5, 15 @ 9:36 am
===They can’t really be that clueless, can they?===
You betcha!
Comment by PublicServant Thursday, Nov 5, 15 @ 9:36 am
IPI’s primary mission is not to inform but to change the terms of public debate.
Comment by Elo Kiddies Thursday, Nov 5, 15 @ 9:36 am
A flat income tax is regressive only compared to a progressive tax system where the rate on low-income earners would be less. I think that is where Austin’s characterization of Illinois income tax law is coming from.
Comment by Spiritualized Thursday, Nov 5, 15 @ 9:38 am
We could make due with a flat tax, provided that the personal exemptions keep us from taxing household income below the poverty threshold.
Provide a $6,700 personal exemption and a family of 3 making under $20,000 a year would not be taxed at all. Same family making $40,000 would have an effective 2.5% tax rate. And those making $200,000 would have a 4.5% effective rate. (very simplified math)
Comment by thechampaignlife Thursday, Nov 5, 15 @ 9:39 am
== They can’t really be that clueless, can they? ==
In homage to OW’s comment on another subject (and with all due apologies to Ms. Clarkson):
Again and again and again and AGAIN.
Comment by thunderspirit Thursday, Nov 5, 15 @ 9:43 am
A flat tax ( same %) is regressive.
A tax that increases (by %) is progressive.
Perhaps she meant to say “a tax rate cannot be both progressive and flat.”
Comment by Rufus Thursday, Nov 5, 15 @ 9:45 am
“They can’t really be that c̶l̶u̶e̶l̶e̶s̶s̶ dishonest, can they?”
Yes. Repeatedly.
– MrJM
As with any extremist group - ignorance and mendacity are their “strengths”.
Comment by Qui Tam Thursday, Nov 5, 15 @ 9:47 am
A regressive tax forces lower income people to pay a higher percentage of their income than a higher income person. For example, a sales tax is regressive because if you and Bruce Rauner buy the same carhartt, you end up paying the same amount of sales tax for that carhartt as a multi-bazillionaire. And since the amount of sales tax that you paid as a percentage of your income is way higher than what the megarich guy paid, it is by definition regressive.
A flat income tax rate is neither regressive nor progressive. It’s just flat.
Comment by Roamin' Numeral Thursday, Nov 5, 15 @ 9:48 am
I vote for clueless. They favor self-comforting ideas over reality-based ones.
Comment by walker Thursday, Nov 5, 15 @ 9:50 am
Clueless by design, so as to make cluelessness acceptable to the public.
Comment by JC Thursday, Nov 5, 15 @ 9:51 am
== They can’t really be that clueless, can they? ==
Rhetorical question or snark?
The answer has been clear for a very long time. So, Yes.
Comment by sal-says Thursday, Nov 5, 15 @ 9:51 am
In Ms. Austin’s defense — her semantics strike me as being a wee bit awkward. That’s all. Flat tax rates have a regressive effect. No harm, no foul.
Comment by Anonymousse Thursday, Nov 5, 15 @ 9:52 am
There is nothing incorrect in Elizabeth Austin’s statement that I see. The IPI is not correct in their statement. Why any of that is ‘cute’ is beyond me.
Comment by Lincoln Lad Thursday, Nov 5, 15 @ 9:52 am
Rich, you’re usually spot on, but the Illinois Policy Institute is technically correct here, at least under basic economic principals.
There are 3 categories of taxation: Progressive, Proportional and Regressive.
The traditional example of a Regressive Tax is sales tax. This is because the taxpayer pays the same amount of tax regardless of income. I make $1,000 per year or $100,000,000 per year, when I buy a $100 TV, I pay $10 in taxes (assuming a 10% sales tax). If I’m the poor person, that’s 1% of my income. If I’m the rich person, that’s almost nothing. Thus, the sales tax disproportionately affects the poor person.
On the other hand, a flat income tax taxes everyone equally. A 5% tax takes 5% of the poor person’s income and 5% of the rich person’s income.
And, we all know how progressive taxation works.
The basic explanation from Investopedia is correct above, but the “uniformly” refers to a uniform amount of tax regardless of income. A flat tax has a uniform percentage, but the actual amount of taxes in dollars changes based on income.
A different article on Investopedia explains this as well - if you look down on the page, you see that a sales tax is regressive, while a flat income tax is proportional.
http://www.investopedia.com/ask/answers/042415/what-are-differences-between-regressive-proportional-and-progressive-taxes.asp
In an economics class, the IPI would be exactly right. We can debate the pros/cons of this policy, but they aren’t being dishonest here.
Comment by Econ 101 Thursday, Nov 5, 15 @ 9:53 am
This is — literally — ECON 101. The most basic economics class I took made the point that flat taxes are inherently regressive. Any self-appointed “policy” institute that doesn’t understand that should be immediately discounted, regardless of whether they are that obtuse by nature or by design.
Comment by South of Sherman Thursday, Nov 5, 15 @ 9:53 am
Wikipedia: a true flat tax is “proportional” but versions are sometimes regressive and sometimes progressive (e.g., when they exempt a certain level of income - not the case in Illinois).
To be honest, I always understood progressive to simply mean higher incomes pay a higher *rate* and regressive meant lower incomes paid a higher rate and flat was flat.
Comment by lake county democrat Thursday, Nov 5, 15 @ 9:53 am
I’m with Romain’ Numeral. Agree 100%
Comment by Lincoln Lad Thursday, Nov 5, 15 @ 9:54 am
OW:
She’s at least as qualified to be a “tax expert” as her counterpart at IPI is to put herself out there as a “theologian.”
And, apparently more qualified than the IPI when it comes to tax policy.
Comment by Juvenal Thursday, Nov 5, 15 @ 9:54 am
They have repeatedly demonstrated their cluelessness in their articles and policy briefs. This demonstrates why their suggestions should not be taken seriously.
Comment by illinifan Thursday, Nov 5, 15 @ 9:55 am
Clueless or dishonest are tne choices.
I guess clueless would be best.
I don’t really understand those who lie to make their points.
If you have to lie to get there, doesn’t that just confirm that your point is invalid?
Comment by Wordslinger Thursday, Nov 5, 15 @ 9:56 am
OW - don’t quite understand the “how cute” thing
Comment by Soccermom Thursday, Nov 5, 15 @ 9:56 am
IPI is correct that the Illinois income tax is not regressive.
http://www.itep.org/whopays/states/illinois.php
According to the link the lowest 20% pay 1.3% of their income toward income taxes (in this case both income and corporate taxes are counted). The rate continues to climb until the top 1% pays 3.3%. The state income tax may not be very progressive, but nonetheless it is progressive because a person’s effective tax rate climbs as their income climbs.
Comment by Spiff Thursday, Nov 5, 15 @ 9:56 am
Ugh.
“How cute, Ms. Austin is playing ‘tax expert’. - says IPI”
It’s snark on IPI. Sorry for not labeling.
Apologies.
Comment by Oswego Willy Thursday, Nov 5, 15 @ 9:56 am
Oh cmon IPI. To paraphrase a great Terry Bruner quote, they’re either lying or they’re stupid and I don’t think they’re that dumb.
Comment by Chicago Cynic Thursday, Nov 5, 15 @ 9:56 am
Thank you Econ 101. Some of our other posters must have had a Poly Sci exam the next period and missed this lecture.
Comment by Bogey Golfer Thursday, Nov 5, 15 @ 9:59 am
Sorry the snark went past me.
Comment by Soccermom Thursday, Nov 5, 15 @ 9:59 am
1) Sorry for the shorthand, thanks on me. I’m sorry.
2) - Soccermom -, glad to see you. Hope you’re well.
Comment by Oswego Willy Thursday, Nov 5, 15 @ 10:03 am
Spiff and Econ 101:
For either of you to make your case, Illinois law would have to treat all income equally. It does not, which is why Bruce Rauner pays a lower effective tax rate than most Illinoisans.
Nice try though.
Comment by Juvenal Thursday, Nov 5, 15 @ 10:03 am
==They can’t really be that clueless, can they?==
Nope. You can certainly say things that you know ain’t so.
Comment by Arsenal Thursday, Nov 5, 15 @ 10:05 am
==If you have to lie to get there, doesn’t that just confirm that your point is invalid?==
Word, nowadays, lying substitutes for having a point.
Comment by Streator Curmudgeon Thursday, Nov 5, 15 @ 10:06 am
Taxes are whatever the presenter tells us they are, in order to make their point.
Comment by VanillaMan Thursday, Nov 5, 15 @ 10:08 am
Liz Austin is at Innovation Illinois. I’ll let them speak for themselves, but all should realize they are a progressive, caring organization with some quality people involved and active. The fact that IPI is attacking them, tells you they should be thoughtfully considered IMO.
Comment by Lincoln Lad Thursday, Nov 5, 15 @ 10:09 am
Incidentally — I am thinking of changing my nickname. I have dibs on Old Ironpants.
Comment by Soccermom Thursday, Nov 5, 15 @ 10:10 am
You can call a head tax regressive, but I think it is fair to say a tax in which everyone pays equal proportions is not regressive depending on who writes the definition.
If you create even one additional rate, the tax inherently becomes progressive, no? So if a flat tax is deemed regressive, taxes cannot be anything but regressive or progressive?
Comment by Shemp Thursday, Nov 5, 15 @ 10:10 am
“A regressive tax is generally a tax that is applied uniformly. This means that it hits lower-income individuals harder.”
The low income people can not afford to pay more taxes. Plus, the wealthy should no longer get a bunch of tax breaks.
Comment by Mama Thursday, Nov 5, 15 @ 10:12 am
Perhaps the IPI is being purposely obtuse.
Comment by illinoised Thursday, Nov 5, 15 @ 10:12 am
Oh, they’re not lying.
It is simply the policy of the Illinois Policy Institute to ignore or misapply the actual meaning of words and terms when those words and terms contradict their policies. See?
Comment by Bluegrass Boy Thursday, Nov 5, 15 @ 10:13 am
The Ill. IT is actually progressive: a low income family of four at $25000 will pay $637 while the family of four earning $50000 pays $1575 two and a half times.
Comment by anon Thursday, Nov 5, 15 @ 10:16 am
==”hits lower-income individuals harder”== is the operative phrase defining “regressive.” Thus it is not a simple numerical expression, but relates to ability to pay relative to other expenses necessary to survive.
Paying 3% of a 30K household income per year hits much harder than paying 3% of a 100K income. That flat tax, in terms of impact, would be “regressive.”
Comment by walker Thursday, Nov 5, 15 @ 10:19 am
Roamin, you need to use the snark symbol or someone may think you’re an IPI analyst.
Comment by Norseman Thursday, Nov 5, 15 @ 10:20 am
walker +1
Comment by Rich Miller Thursday, Nov 5, 15 @ 10:26 am
When exemptions, deductions and credits are taken into consideration, Illinois’ income tax structure is actually overall slightly progressive. For more information see Taxpayers’ Federation - Tax Facts - April/May 2014 - Graduated Income Tax From a Tax Policy Perspective - Table 1.
Comment by Natalie Thursday, Nov 5, 15 @ 10:27 am
A flat tax is regressive because people who live on less, poorer people, have to spend less on basic necessities as a result of the tax. People with disposable income do not have to adjust their spending because of taxes. They just can’t invest as much. So to be histrionic about it, a flat tax takes food out of poor people’s mouths, but only affects the amount of money the rich can hoard. What? I said that was the histrionic version.
Comment by Me too Thursday, Nov 5, 15 @ 10:27 am
Hey Econ101,
===On the other hand, a flat income tax taxes everyone equally. A 5% tax takes 5% of the poor person’s income and 5% of the rich person’s income===
If you check out one’s IL-1040 you’ll probably notice it has more than 3 or 4 lines. If you want to step out of the survey course and get into the specifics, not everyone in Illinois is paying the same effective tax rate since there’s a lot of income that is added, subtracted, and credits given.
So your explanation of how Illinois’ flat tax isn’t regressive only works in a very narrow theoretical instance that doesn’t exist in reality.
If you have to “imagine a world where everyone pays an equal 5% tax” you’ve already lost the argument.
And since you apparently need help with this, the definition of uniform is: not changing in form or character; remaining the same in all cases and at all times.
So a 5% income tax on everyone’s income would be a 5% income tax on everyone’s income, meaning that it remains the same at all time.
I don’t want to beat a dead horse here, but maybe you should come back when you’re in a 300 level econ course.
Comment by Anon Thursday, Nov 5, 15 @ 10:27 am
Spiff–
I think if you check out ITEP’s website in any greater detail, you’ll undermine your argument.
And if you continue to rely on them for citation after examining their data, then welcome to the group of folks supporting a fair, progressive tax in Illinois, where those who make more pay more, and those who make less pay less as a percentage of their income!
Oops!
Comment by Emily Miller Thursday, Nov 5, 15 @ 10:31 am
Norseman, it wasn’t snark. Person A makes $10,000 per year. Person B makes $100,000 per year. They each buy a widget. The sales tax on a widget is $100. That sales tax costs Person A 1% of their annual salary. But it only costs Person B 0.1% of their annual salary. By definition, a sales tax is regressive.
A flat income tax is neither regressive, nor progressive. If Person A and Person B each pay 10% of their income in income taxes, then it is proportional.
I can’t stand IPI. But I’m not going to say they’re wrong when they aren’t. They’re wrong often enough as is.
Comment by Roamin' Numeral Thursday, Nov 5, 15 @ 10:32 am
http://www.itep.org/whopays/states/illinois.php
ITEP says Illinois has the fifth-most regressive tax structure in the nation.
And I believe Ms. Austin was referring specifically to the income tax rate, which is both flat and regressive in its impacts on those with lower incomes. Although EITC provides some relief to lower-income earners, the larger issue remains: Illinois’ wealthiest quintile are paying an unfairly small share. That, to me, is regressive in effect.
Comment by Soccermom Thursday, Nov 5, 15 @ 10:34 am
@Juvenal
https://capitolfax.com/2014/10/10/rauner-releases-tax-return-608-million-income/
As far as I know Illinois taxes capital gains at the same rate it does regular income.
Looking at the numbers Rich posted when Governor Rauner released his 2013 tax returns it still shows he paid an effective state tax rate of 4.69%. My guess is there are very few Illinoisans that have as high of an effective tax rate as that.
Comment by Spiff Thursday, Nov 5, 15 @ 10:39 am
Flat Tax = Welfare for the Wealthy
Comment by Jack Stephens Thursday, Nov 5, 15 @ 10:48 am
I agree with Soccermom. Ms. Austin is exactly right that our flat tax is regressive and her saying so clearly touched a nerve at IPI. Their reaction tells me a lot.
Comment by 47th Ward Thursday, Nov 5, 15 @ 10:52 am
A flat state income tax is regressive in its impacts because it is based on net income declared on the federal income tax return. Wealthier people are able to shelter much more of their income from tax. (It’s kind of hard to fully fund an IRA when you’re making $24,000 a year.)
It is indeed true that the Illinois income tax system has introduced a tiny bit of fairness by including the EITC, although Illinois has been one of the stingiest states in the nation where the EITC is concerned.
But the reality is, if you compare the percentage of gross income that a low-income person pays vs. the percentage of gross income paid by a billionaire like, oh, Bruce Rauner, you will see that the person with the least means is paying the highest taxes.
Comment by Soccermom Thursday, Nov 5, 15 @ 10:57 am
as usual, Carroll tells us all we need to know to understand what’s going on:
“have i gone mad? im afraid so, but let me tell you something, the best people usually are.”
― Lewis Carroll, Alice in Wonderland
When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean — neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master – – that’s all.”
(Through the Looking Glass, Chapter 6)
Comment by steve schnorf Thursday, Nov 5, 15 @ 11:15 am
IPI is right folks.
The Investopedia definition that Rich left out states that a “regressive tax” is “A tax that takes a larger percentage from low-income people than from high-income people”.
A flat tax takes the same percentage from both, not accounting for any tax credits.
Comment by Phenomynous Thursday, Nov 5, 15 @ 11:17 am
The Illinois Policy Institute is a front organization of the Libertarian Party whose purpose in fact is to “study” and promote policies consistent with its Libertarian principles. One of those policies is opposition to a progressive tax system like that used by US Federal tax system and by more than two thirds of the states, but not Illinois, which has been described as having one of the worst regressive flat tax systems. IPI has been credited with its success in preventing progressive tax reform in this state. It has been often said that a progressive tax system in this State would be the solution to our revenue woes.
Considering the IPI’s constant, arguably partisan, political activity, this former tax practitioner cannot comprehend how the IPI was granted Section 501c3 charitable, scientific, educational tax exemption, except by political pressure. During the past decade Governor Rauner has been one of the IPI’s biggest supporters, deducting his support from his income and, as a consequence, his tax liability.
Comment by Retired lawyer Thursday, Nov 5, 15 @ 11:24 am
I have a bit of sympathy with everyone here because it’s pretty clear, at this stage, that we’re operating with some separate initial definitions, and thus in circles.
I happen to think a flat tax is a wholly unfair tax. And I think that regressivity implies unfairness, too. But I actually have some weird academic sympathy with the posters here who don’t want to equate the economist definition of “flat” with “regressive.”
Flat taxes and flat-out regressive taxes can both be unfair taxes, after all. Just in different ways.
Comment by ZC Thursday, Nov 5, 15 @ 11:28 am
The Income-Driven federal student loan repayment plans offer an excellent example of affordable taxation. Your payment is 10% of your disposable income (defined as your AGI minus 150% of the poverty threshold for your family size).
For a family of 3 making $50K/yr, that is about $2K or 10% less than they are currently paying.
Same family making $30K/yr would owe no tax (currently they pay $1200).
Same family making $100K/yr would owe $7K compared to the $4700 they pay now.
Comment by thechampaignlife Thursday, Nov 5, 15 @ 11:29 am
I wouldn’t mind a progressive income tax if our other taxes(property and sales)weren’t among the highest in the country.
Comment by john doe Thursday, Nov 5, 15 @ 11:34 am
Illinois now has various tax credits and exemptions so it is hardly a flat tax anymore.
Comment by accountant Thursday, Nov 5, 15 @ 11:51 am
There are regressive, proportional, and progressive taxes. The Illinois State Income Tax is proportional (flat tax). However, the system of Illinois taxes is regressive - the State sales tax is regressive, the property tax is regressive - and these combined with the flat tax equal a regressive tax system.
The income tax is flat - so all people pay the same proportion of their income.
The other taxes tax essential spending or assets, which compose a higher portion of a low income budget compared to wealthier individuals.
Most states have sales taxes, user fees (essentially taxes) on essential services, and income tax. If the income tax is flat (neither progressive or regressive), the taxing system will be regressive. So most states use a progressive income tax to offset the sales tax, user fees, and local government property taxes.
Comment by archimedes Thursday, Nov 5, 15 @ 12:17 pm
An undeniably regressive feature of the IL income tax is in taxing 3.75% of the income of the working poor, while completely exempting pensions and Social Security, even when the pension is six figures. Otherwise, Soccermom nailed it.
Comment by nona Thursday, Nov 5, 15 @ 1:09 pm
Right, what Archimedes said, we have to draw a distinction between looking at any one tax in isolation and the sum aggregate of taxation in Illinois.
Thanks in part to the IL Constitution, we’re not a progressive-taxation state, overall.
Comment by ZC Thursday, Nov 5, 15 @ 1:10 pm
They can’t really be that heartless, can they?
Yes, unfortunately they can.
Comment by Enviro Thursday, Nov 5, 15 @ 1:44 pm
==Paying 3% of a 30K household income per year hits much harder than paying 3% of a 100K income. That flat tax, in terms of impact, would be “regressive.”==
I really can’t improve on Walker’s description. But it is worth pointing up that paying 3% tax on a $30,000 income, eats into money needed for everyday necessities - rent, food, basic transportation, etc. Paying a 3% tax on a $100,000 income means maybe not a new car as often. Paying 3% on a $500,000 income means maybe fewer vacations each year. Paying 3% on a $55 million income doesn’t mean much of any sacrifice.
Comment by Joe M Thursday, Nov 5, 15 @ 2:08 pm
Reboot Illinois - what would you expect.
Comment by Rollo Tamasi Thursday, Nov 5, 15 @ 2:29 pm
Actually, sales tax is the regressive tax since poorer folks pay a greater % of their income on buying goods since they don’t have enough money to save/invest.
Comment by Robert the Bruce Thursday, Nov 5, 15 @ 2:47 pm
70 or so comments on regressive taxation and no mention of the most regressive aspect: the exemption of retirement income.
Comment by nixit71 Thursday, Nov 5, 15 @ 3:57 pm
john doe, the biggest driver of high property taxes is the chronic underfunding of education by the State. You fix that and you can drastically lower property taxes. That requires more revenue, like from a progressive income tax.
Comment by MyTwoCents Thursday, Nov 5, 15 @ 5:08 pm
IPI is a Koch funded, Reeder propagandized deceit machine.
Comment by IL17Progressive Thursday, Nov 5, 15 @ 5:28 pm