Pritzker refuses to say how much new revenue he’ll need from tax hike, so here’s my initial guesstimate
Thursday, Aug 23, 2018
* So, I asked this question…
* And I just received this answer…
So, not only won’t Pritzker tell us which income levels should be protected from higher tax rates, now he won’t say how much money he has to raise to pay for his new programs.
And that leaves me no choice but to speculate.
* First, there’s a $1 billion or so structural operating deficit to deal with.
And then there’s his plan to accelerate pension payments. It sounds to me like he’s basing his idea on the Center for Tax and Budget Accountability’s reamortization plan, which proposes borrowing $11.2 billion over eight years. With interest, that’s about $1.7 billion a year.
The bill backlog stands today at $7.8 billion. Of that, you’d have to get rid of at least $4 billion to return to a “normal” payment cycle. Let’s say you bond out $4 billion over five years and you wind up with about $900 million in annual payments.
And let’s figure $1 billion for his new programs, just because it sounds like a nice round number and they won’t say what they want to spend so I have to just throw it out there. I could be low-balling, I just don’t know.
Pritzker also wants to do a big capital program. Let’s put that cost at $1 billion a year, because he’s mentioned that in the past as a baseline.
He said again yesterday that he wants to pump more money into local schools in order to lower property taxes, because that tax is really what’s driving people out of state. A five percent cut in local school property taxes (which ain’t much) would cost about $1 billion. I’m figuring he won’t go even that high. Does $500 million sound about right, particularly if you cheat a bit by including in that number the extra $300 million mandated every year by the new education funding reform plan?
So, you’re looking at $6.1 billion in revenue needs. But then there’s all the natural spending growth in programs like Medicaid. I don’t know what that could be, so let’s just say natural revenue growth takes care of it - even though it probably won’t.
Subtract out about $500 million gained from legalizing marijuana and sports betting and you’re at $5.6 billion (although that pot estimate is probably too, um, high). If they expand gaming in a big way, some say that could bring in $1 billion more a year, but I really doubt it.
To put all that into perspective, the last income tax hike in 2017 produced about $5.7 billion in new net revenues its first year, according to COGFA.
Am I missing anything? I’ll update if I am.