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Wednesday, Feb 17, 2021

* Joe Cahill at Crain’s

Scrambling to plug a $3 billion budget gap, Gov. J.B. Pritzker aims to raise $900 billion by closing “corporate tax loopholes.”

Yet he won’t consider closing the biggest loophole of all, one that costs Illinois as much as $3 billion annually. This loophole exempts half the economy—the faster-growing half, by the way—from a tax that applies to the other half.

I’m talking about the loophole that exempts services from sales tax, which Illinois levies almost exclusively on merchandise sales. Illinois has lagged far behind national trends in modernizing its sales tax system to reflect the long-term shift toward a more service-based economy. A generation ago, services accounted for about one-third of the economy; today it’s half or more, depending on how the data is compiled.

This has been debated endlessly for decades. It’s not a bad idea, but Pritzker campaigned against it, so supporting it now would be a huge flip-flop. Still, as the old saying goes, a statesman is a politician who flip-flops in your policy direction.

* Also, Joe Cahill last September

Under normal circumstances and in a normal state, I would support a progressive income tax system. But these aren’t normal times, and Illinois is far from a normal state. We’re in the midst of a steep recession triggered by the coronavirus pandemic. Raising taxes on anybody during a recession puts more downward pressure on the economy.

Even before the virus-induced downturn, Illinois was mired in a fiscal bog of its own making, thanks to decades of irresponsible political leadership. A graduated income tax would reward many of the same politicians who created the mess, entrusting them with more money and greater taxing power. Bad idea.

So, lemme get this straight. High earners during a recession shouldn’t face an income tax hike, but everyone including the unemployed should pay taxes on services during the same recession?

Gotcha.

- Posted by Rich Miller        

14 Comments
  1. - Two Cent Ante - Wednesday, Feb 17, 21 @ 10:59 am:

    The problem with Rich is he remembers everything. Nice catch.


  2. - Smalls - Wednesday, Feb 17, 21 @ 11:04 am:

    I think you can marry the two ideas. Implement a fairly significant services sales tax, and then significantly bump up income tax exemptions, which would have the effect of a progressive income tax. The small drop in income tax would be accounted for as part of the overall increase in sales tax on services.


  3. - Don’t Worry, Be Happy - Wednesday, Feb 17, 21 @ 11:11 am:

    And money raised from taxing services wouldn’t reward many of the same politicians who created the mess, entrusting them with more money and greater taxing power? I think what he meant to say is that tax money from rich people rewards politicians, but they can have all the tax money they want from poor people.


  4. - City Zen - Wednesday, Feb 17, 21 @ 11:11 am:

    ==Implement a fairly significant services sales tax==

    Or simply broaden the sales tax base by lowering the overall rate and applying it to more services, improving stability and predictability of that revenue source.

    ==then significantly bump up income tax exemptions, which would have the effect of a progressive income tax.==

    If they didn’t do this in 2011 with the original hike from 3% to 5%, they’re probably not going to do this now.


  5. - Bruce( no not him) - Wednesday, Feb 17, 21 @ 11:12 am:

    Share the pain? Don’t pick on the rich. S/


  6. - Smalls - Wednesday, Feb 17, 21 @ 11:18 am:

    == If they didn’t do this in 2011 ==

    If we keep doing things like we did in the past, we will never dig the state out of this hole. I’m not saying they are going to do it, I am saying they should do it.


  7. - Arock - Wednesday, Feb 17, 21 @ 11:34 am:

    Or try to make Illinois a better place for business to do business and get more people working in better paying jobs to try and solve the perceived tax revenue problem. And pass truly balanced budgets instead of incurring more debt and needing more money to pay interest charges.


  8. - Montrose - Wednesday, Feb 17, 21 @ 12:12 pm:

    “Under normal circumstances and in a normal state, I would support a progressive income tax system.”

    I hate lines like this. “It is a good idea, just not now…” It is always not now. The perfect moment he says he is waiting for will never come.


  9. - JS Mill - Wednesday, Feb 17, 21 @ 12:14 pm:

    =Or try to make Illinois a better place for business to do business and get more people working in better paying jobs to try and solve the perceived tax revenue problem.=

    What? The problem isn’t perceived, it is real.

    the way to make Illinois better is to pay our bills and create stability, unless you do not believe “business” and “finance” experts when they tell us that very thing.

    Ralph Martire has been talking about expanding the tax base of nearly 20 years. As our economy has shifted our taxing has not. Why shouldn’t services (especially lawyers) be taxed? Makes no sense.


  10. - Nieva - Wednesday, Feb 17, 21 @ 12:47 pm:

    A tax is a tax is a tax


  11. - West Sider - Wednesday, Feb 17, 21 @ 1:07 pm:

    When Craine’s and the Tribbies begin to advocate for their readership/overlords to lead with tangible sacrifices- I will read- and begin to take them seriously. Until then- I reflexively presume they’re parasites arguing about how to eat the host.


  12. - Thomas Paine - Wednesday, Feb 17, 21 @ 2:23 pm:

    Pritzker should wait and let the GOP put the Service Tax on the table if they don’t like the options he has laid out.


  13. - walker - Wednesday, Feb 17, 21 @ 4:15 pm:

    A progressive income tax structure is generally less painful during a recession when most incomes are down, not the opposite. Unless of course you are primarily focused on the highest earners whose incomes remain strong.


  14. - d. p. gumby - Wednesday, Feb 17, 21 @ 4:24 pm:

    Covid killed the progressive income tax this time (that the lies told by Griffin et. al.), but someday it must come as it is the only legitimate method of spreading the cost of all those services that everyone demands but do not want to pay for.


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