* 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?