Gov. Pat Quinn’s income tax increase plan may be good public policy, but it’s probably very bad politics.
The governor wants to shield low- and moderate-income working families by tripling the state income tax’s personal exemptions, from $2,000 to $6,000, while increasing the income tax rate by a point and a half.
Too many numbers can make the eyes glaze over, but try to stay with me a few more seconds.
Under Quinn’s plan, a family of four with an adjusted gross income of $30,000 would receive a $390 tax cut. A single person making $30,000 would be hit with a $240 tax increase. A family of four with a $56,000 annual income would pay no extra taxes. A single mother with one child who makes $56K would pay $420 more. Etc.
I can relate.
It’s complicated. And complicated tax proposals can scare the daylights out of your average, everyday state legislator.
Heck, even when things aren’t complicated, the voters can often draw the wrong conclusion.
For instance, Ohio has cut its income tax rates by 21 percent since 2005. Yet, a new statewide poll taken by Hart Research Associates discovered that a mere 8 percent of Ohioans knew their income taxes had been reduced. A third of Ohioans actually thought their taxes had increased. The rest either didn’t know or figured their tax rates were about the same.
Ohioans aren’t especially stupid or ignorant, and that poll result isn’t really all that surprising.
Lots of people believed their income taxes were raised by former President Bill Clinton, even though his first-term tax increases focused on the wealthy. People are (rightfully) cynical and just don’t pay very close attention to the news, or, apparently, their pay stubs. They see the words “tax increase,” and figure they’ve been dinged.
Meanwhile, much of the “person on the street” reporting since Quinn unveiled his tax idea has focused on angry, worried folks who were certain that their taxes would increase so high that they’d have to get another job or cut way back on essentials in order to stay even. Many probably have little or nothing to worry about. But you’d never know it by their reactions or the reporting.
And because our current income tax rate is just 3 percent, Quinn’s 1.5 percentage point increase turns out to be a whopping 50 percent increase. “Quinn proposes 50 percent tax increase” is an incredibly scary headline, regardless of the real-life impact on taxpayer pocketbooks.
So, if people will cynically believe that their tax burden will increase regardless of the facts, and the media misreports the tax proposal in the first place, and potential political opponents will undoubtedly take full advantage of all that cynicism, ignorance, anger and confusion, what incentive does the average state legislator have to vote for Quinn’s plan?
Quinn says he’s willing to lose the election in order to do what’s right. But how many legislators will follow him off that cliff?
Because Quinn’s tax increase includes the exemption “reform,” it doesn’t raise much money to patch the state’s gaping budget deficit. So, there’s a lot of talk in Springfield of cutting Quinn’s tax increase way back, forgetting about the exemption reform and raising about the same amount of cash.
Some are willing to phase in the exemption reform over a few years. Others have suggested borrowing money to close the deficit and paying it back with a possible tax increase down the road.
There are sound policy reasons to do what Quinn wants to do. But political reality in Chicago and Cook County — where voters are already super-hostile to any talk of tax increases — means the governor’s idea could use a major rethink.