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* Greg Hinz…
In a report released [yesterday], the Center for Tax and Budget Accountability—a group that leans left but generally gets its math right—says just 11.8 percent of Illinois individual income tax payers got 54.5 percent of the savings when… the tax rate dropped from 5 percent back to 3.75 percent. […]
According to the analysis of state tax collections, those with an adjusted gross income of more than $1 million make up just 2 percent of tax filers, but they got 13.5 percent of the savings, with an average of $37,000. Those with AGI of $200,000 to $1 million got 19.2 percent of the savings, and those earning between $100,000 and $200,000 captured 21.7 percent.
Of course, it’s hard to get much money out of low-income people who don’t make much. To put that a different way, the rich of course will benefit most from a tax cut, at least in the short run, because they make the most.
But the relative shares of who got what still are pretty stark. According to the analysis, the combined savings netted by every taxpayer in the state who reported AGI of under $35,000 was less than the savings earned by the 0.2 percent of taxpayers who are millionaires.
(B)y focusing the majority of tax relief on top income earners, the phase-down of the personal income tax rate cannot be expected to generate much economic activity. That’s because the economy is primarily made up of consumer spending, and typically, affluent families are not likely to spend most of the tax relief they receive, because their disposable income is already increasing significantly over time. Given this growth in disposable income, affluent families do not have significant unmet needs, and tend to save rather than spend what they receive in tax relief.
Low and middle income families, however, have greater unmet needs because in real terms their earnings are declining over time.1 So when low or middle income households obtain an additional dollar of income—say through targeted tax relief—they tend to spend that dollar in the consumer economy. Unfortunately, the bottom 60 percent of income earners in Illinois will receive only $491 million or 13.2 percent of the $3.7 billion in tax relief from the phase-down, which greatly diminishes any potential the phase-down has to stimulate spending.
In fact, to the extent that there is any mild stimulative impact that can be anticipated from the phase-down of the personal income tax rate, it will be negated by the public service spending cuts that will have to be made to pay for the $3.7 billion loss in recurring tax revenue it causes.
posted by Rich Miller
Wednesday, Feb 18, 15 @ 9:48 am
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Should never be more obvious than it is now, the path forward for democrats next election cycle is to go all in on a constitutional amendment to a graduated income tax. As long as they continue to support the current regressive tax structure, the benefits will mostly go to the wealthy.
Comment by Very Fed Up Wednesday, Feb 18, 15 @ 9:53 am
By forcing?
Ummm that is the way the Constitution is written…
Comment by OneMan Wednesday, Feb 18, 15 @ 9:57 am
2% of tax filers had a gross income of more than one million?
I must be reading that wrong?
Comment by chi Wednesday, Feb 18, 15 @ 9:58 am
VFU –
If you put some sort of protection that the top rate is only going to be x% higher than the lowest rate, this Republican could get behind it…
Comment by OneMan Wednesday, Feb 18, 15 @ 10:01 am
With a flat tax - the result (higher income getting a bigger dollar break than lower income) is obvious. The economic impact reported is solid, and why many argue against a flat tax and why sales taxes are generally regarded as regressive in nature.
Comment by archimedes Wednesday, Feb 18, 15 @ 10:02 am
Well, since it’s a flat rate tax I guess the same 11.8% of taxpayers also pay about 54% of the taxes, and the top 2% paid 13.5%.
Cute how when we increase taxes we should make the structure more progressive, and when we cut taxes we should also make the structure more progressive. Nice work if you can get it…
Comment by Harry Wednesday, Feb 18, 15 @ 10:14 am
Their math might be right, but their understanding of societal economics isn’t.
You earn more, you pay more in taxes, and when those taxes are refunded, they get more back.
You have to believe that what they earned isn’t theirs, that we live in a world where the economy doesn’t grow, and believe that we can manipulate our government so that every soul can be shown its true value. Heavenly goals, but not Earthly ones.
Comment by VanillaMan Wednesday, Feb 18, 15 @ 10:21 am
“2% of tax filers had a gross income of more than one million?”
Looks like a typo. The piece later says “the 0.2 percent of taxpayers who are millionaires”.
– MrJM
Comment by MrJM Wednesday, Feb 18, 15 @ 10:24 am
“You have to believe that what they earned isn’t theirs, that we live in a world where the economy doesn’t grow, and believe that we can manipulate our government so that every soul can be shown its true value.”
You have erected another mighty straw-man, how ever will you vanquish it?!?
– MrJM
Comment by MrJM Wednesday, Feb 18, 15 @ 10:26 am
The CBTA is completely funded by the unions and run by wealthy and politically clouted union officials. CBTA’s research is heavily biased to revenue and never mentions process efficiencies or expense reductions. Funny how an organization that is 100% funded by organizations that are 100% dependent on tax revenues will produce research results that call for increased taxes 100% of the time.
Here is the break down of CBTA leadership:
. Dan Montgomery - President, IFT (teachers union)
. Michael T. Carrigan - President, ILLINOIS AFL-CIO
. Jim Reed - IEA union executive (teachers union)
. John Cameron - AFSCME union executive
. Les Bond - investment firm vying for pension investment $$
. David Bonnette - $95K pension for 17 years of service at stake
. Colleen Lutz - $111K pension; most likely recipient of 20% pension spike
. Stephen B. Schnorf - collects 2 pensions AND a salary from the state
And how is the CBTA funded? Further analysis of Form 990 shows the following major contributors…
. AFSCME = $85,000 http://pdfs.citizenaudit.org/2014_10_EO/37-1034709_990O_201312.pdf
. SEIU = $100,000 http://pdfs.citizenaudit.org/2014_12_EO/36-2819599_990O_201312.pdf
. Economic Policy Institute - Basically represents a conglomerate of public and private sector unions
. Chicago Foundation For Women
. The Chicago Community Trust (probably the most neutral of all)
Comment by nixit71 Wednesday, Feb 18, 15 @ 10:28 am
You don’t vanquish what is defeating itself.
Comment by VanillaMan Wednesday, Feb 18, 15 @ 10:32 am
But nixit71, as Greg Hinz says, it generally gets its math right
Comment by Joe M Wednesday, Feb 18, 15 @ 10:34 am
nixit71-
Where is their math wrong? Where is the bias?
Comment by chi Wednesday, Feb 18, 15 @ 10:36 am
Also, a lot of the people on the CBTA board will be interested to find out that they’re wealthy.
Comment by chi Wednesday, Feb 18, 15 @ 10:37 am
=The CBTA is completely funded by the unions and run by wealthy and politically clouted union officials.=
Wow! And they see the situation as so dire that they wish to pay higher taxes so that working class folks can pay less? That makes their argument very powerful.
Comment by Carhartt Representative Wednesday, Feb 18, 15 @ 10:39 am
No one said the math is wrong. I can plug #’s into a spreadsheet too and solve our revenue problem (on paper). It merely tells one side of the story, the side that just happens to benefit his benefactors.
CBTA keeps harping on that 5% tax rate as the baseline for solving our tax problems. Why haven’t they revised their graduated tax plan to reflect the 3.75% baseline, because that’s the law. That would still increase tax revenues. Where’s that new plan? Guessing it doesn’t align with the public sector union agenda (his employer, basically).
Also, where is there recommendation of taxing retirement income? Those who have retired recently have benefited greatly from an artificially low income tax rate for decades. Shouldn’t they be on the hook for something?
Many iterations ago, I believe the CBTA did present taxing retirement income as an option (as a footnote). Now it has disappeared. Why?
Comment by nixit71 Wednesday, Feb 18, 15 @ 10:46 am
@Carhartt Representative - Funny, most CBTA execs are retired or are much closer to retirement that the beginning of their careers. Raise taxes, then retire and not pay state income taxes. The impact on them is minimal, considering the benefits they garnered during their working years.
Comment by nixit71 Wednesday, Feb 18, 15 @ 10:49 am
“To put that a different way, the rich of course will benefit most from a tax cut, at least in the short run, because they make the most.”
And because they pay the most! Even in a flat % tax those that make the most pay the most- proportionately. The CTBA understand that quite well but hope others don’t
Part of the spin campaign that both sides will escalate as things get rougher.
Comment by Federalist Wednesday, Feb 18, 15 @ 10:51 am
IDR data for 2012 that I have been able to locate on their website reveals that of the 5.545 million tax returns, .51 million were from those making $500,000+ (1%). Did not see data for those making over $1,000,000.
That 1% paid $3.983 billion of the $16.151 paid in Illinois income taxes ( 24.66% ). This was before property tax and EIC credits.
Report ID TDWR -11TEOY-018
Go online and look for yourself to see if I made any mistakes.
Comment by Federalist Wednesday, Feb 18, 15 @ 11:03 am
Funny how an organization that is 100% funded by organizations that are 100% dependent on tax revenues will produce research results that call for increased taxes 100% of the time.
If any organization is self-loathing, it implodes. What organization doesn’t believe in itself or its goals? Your prejudice is showing.
While I find their report Pollyannaish, I don’t try to find conspiracies here. How can their goals be nothing but noble? I am not threatened by their goals. My problem is that they are being basically unfair to taxed citizens because the fair tax isn’t providing enough tax revenue, so they want us to change it, not simply raise it.
Who should be treated fairly? Citizens whose wages are taxed, or citizens dependent upon those taxes?
This report favors the consumers of those taxes because they consider their goals important enough to suspend any fairness to those whom are taxed. That is their priorities. That’s OK.
I think what they want to accomplish are good things - its just that how they want us to get their is unfair and unequal to Illinois citizens. When we start deciding how much someone should earn and how much they are worth what they earned - we cross a line and start judging people we depend upon for our tax revenue, which isn’t a good thing, in my opinion.
A Flat Tax is basically a Fair Tax. If we find that it is not providing sufficient government revenue, then it should be raised - not replaced with something unfair.
Comment by VanillaMan Wednesday, Feb 18, 15 @ 11:06 am
The tax system in Illinois is broken. It needs to be reformed.
==A Flat Tax is basically a Fair Tax.==
Your opinion. I don’t consider it fair that somebody making $50,000 a year pays the same percentage as somebody making $500,000 a year. But that’s just my opinion.
Comment by Demoralized Wednesday, Feb 18, 15 @ 11:13 am
Whether or not those who pay the most taxes will get the most in tax relief might be clear, but it is a trivial argument regarding the economy. So is the “confiscation” argument.
What really matters is whether CBTA’s argument about the impact on the economy is right or wrong. Will lower taxes benefit the economy more on the demand side or on the supply side, given our current rates and structure? Will we gain more from immediate increases in consumer spending, or from increased likelihood to invest in new jobs in Illinois?
History and logic show CBTA to be correct about the potential economic impact of any tax decrease being less than it could be, given the current level and structure of income tax in Illinois.
Comment by walker Wednesday, Feb 18, 15 @ 11:22 am
@VM: A flat income tax is only a “Fair Tax” if you ignore all other taxes paid, or if you don’t care about the relationship of total taxes paid with respect to incomes. Since most other taxes paid on the state and local level are regressive or flat, the total tax paid by Illinois residents with respect to income is regressive.
If we only had Income Taxes and no other taxes, a flat tax would be fair. But we don’t, and we never will.
Comment by doofman Wednesday, Feb 18, 15 @ 11:33 am
Fed up is correct–only a graduated income tax will create a fair tax system in Illinois so we can reduce dependence on property tax, fund schools and higher education, address the pension funding issues. Only because Rauner and his 1%ers oppose it will this not be proposed.
Comment by D.P.Gumby Wednesday, Feb 18, 15 @ 11:35 am
So Schnorf has no credibility because he earned a couple of pensions? That reveals more about the critic than it does about Steve.
The critic concedes the numbers are correct but complains the report gives part of the story. This report does not purport to cover all aspects of taxation, merely who benefited from the biggest tax cut in state history. It accomplishes that goal accurately.
Comment by anon Wednesday, Feb 18, 15 @ 11:42 am
I bet whatever tax enhancements the governor may propose will not be mainly paid by the top 12%.
Comment by anon Wednesday, Feb 18, 15 @ 11:43 am
===If we only had Income Taxes and no other taxes, a flat tax would be fair. But we don’t, and we never will.===
Well said doofman.
Comment by 47th Ward Wednesday, Feb 18, 15 @ 11:57 am
Doofman x2.
The problem with a flat tax is that the wealthy have the resources to “game” the system and minimize the impact when they’re caught…like when Rauner “accidentally” claimed homestead exemptions on all three properties in IL.
Comment by Jocko Wednesday, Feb 18, 15 @ 12:11 pm
If we only had Income Taxes and no other taxes, a flat tax would be fair.
Then we agree!
You want to couple that fairness to the unfairness of the other taxes paid, but I want to ensure that our government recognizes each citizen equally and fairly. Take income tax out of the reach of those who enjoy arguing over subjective qualifiers about who should pay more and why, and fence it into place.
Progressive taxation has been around a long time. When Illinois went with the Fair/Flat tax, it was considered modern, equal and good. The problem today is that we don’t have enough tax revenue. You don’t throw away what is a good and fair thing to do, because you need more tax dough.
You keep what is fair, and raise it fairly.
Comment by VanillaMan Wednesday, Feb 18, 15 @ 12:15 pm
The problem with a flat tax is that the wealthy have the resources to “game” the system and minimize the impact when they’re caught…like when Rauner “accidentally” claimed homestead exemptions on all three properties in IL.
The Flat/Fair Tax didn’t cause that and a Progressive Tax won’t fix that. As a matter of fact, a progressive tax would make gaming a whole lot more rampant.
That was why we went with the Flat/Fair tax - to avoid what it is you claim it is causing.
Comment by VanillaMan Wednesday, Feb 18, 15 @ 12:18 pm
===So Schnorf has no credibility because he earned a couple of pensions?===
Never said he had no credibility. But his motives to increase taxes when his primary source of income is not taxed are obvious. Skin…meet game.
Comment by nixit71 Wednesday, Feb 18, 15 @ 12:20 pm
@VM: I don’t think we agree at all, unless I’m completely misunderstanding your points.
Currently, we have a flat (ie “Fair”) state Income tax, in contrast with a progressive federal income tax (and the progressive income taxes in our neighboring states). The result of this is that, in addition to all other taxes citizens pay, including sales tax, means the total tax on the state and local level is regressive. If we abolished all other state and local taxes and kept our income tax as-is, we would have a flat tax (and arguably a “fair” one).
Are you suggesting that our current income tax isn’t either flat or fair, or are you suggesting that we actually should abolish all other state and local taxes (which I think is impossible)? Or am I missing something?
Side note: I’ve seen various proposals about transitioning away from Income taxes completely to sales/consumption taxes. The only way from preventing these tax ideas from being completely regressive with respect to income is to have massive cash transfers (not just tax credits or refunds of taxes paid, but giving lower income people cash directly), which to me is mathematically and logically sound, but politically impossible.
Comment by doofman Wednesday, Feb 18, 15 @ 12:48 pm
Someone asked how we define wealthy. Let’s take Colleen Lutz mentioned above and her $111K pension, normalize that against a current worker, and plug that into the CBTA’s proposed graduated tax plan (see: http://www.ctbaonline.org/sites/default/files/reports/ctba.limeredstaging.com/node/add/repository-report/1385494205/R_2012.02_CTBA%20Graduated%20Income%20Tax%20FINAL%20Report%20Feb%202012.pdf)
Since Colleen is only subject to fed income taxes on her retirement income, she takes home $82K per year (assuming 25% fed rate). For a private sector working man to equal her take home pay, with SS/medicare/state taxes plus 10% retirement contribution, he would need to make $150K to bring home $82K per year.
How does the CBTA treat both under their plan? Well, since working man has to make $150K to equal Colleen’s $110K, he’s subject to a 6.5% effective tax rate on his income. So as we normalize the two gross incomes, why is the working man paying 6.5% tax and the retiree, bringing home the SAME amount, paying zero?
I would hardly call either wealthy, but neither one is struggling. Why 6.5% for one and 0% for the other? Any why can’t the CBTA seem to get behind this?
Comment by nixit71 Wednesday, Feb 18, 15 @ 12:49 pm
Vman the flat tax aint flat
we have so many credits and deductions. Those with investment income tend to be able to reduce what they pay from the flat tax so they pay a smaller percentage of overall income the. The middle class. Samething in reverse, those on the low end tend to pay very little to no tax.
The pentultimate question is how do you account for social structure. I.e. What do we want our society to be like.
I support removing all deductions and credits for people making over 100k so that we are able to get the full flat tax amount from those grps.
Comment by Ghost Wednesday, Feb 18, 15 @ 12:58 pm
Why is it conservatives are quick to denounce a progressive tax as unfair, but don’t seem to notice the highly regressive tax system that already exists? Is fairness only for those with the greatest ability to pay?
Comment by anon Wednesday, Feb 18, 15 @ 1:49 pm
FAIRNESS is most often in the eye of the beholder.
One would have to take specific examples and then have a discussion of what is fair under that situation. And undoubtedly there would be a variety of opinions.
Do not assume that anyone has a monopoly on fairness.
Comment by Federalist Wednesday, Feb 18, 15 @ 3:37 pm
Class warfare is over. The poor lost.
Comment by 47th Ward Wednesday, Feb 18, 15 @ 4:59 pm
@47th Ward
=Class warfare is over. The poor lost.=
Nope. They never bothered to enlist. Fighting for opportunity for education and employment was just too much work. They thought someone else would do the fighting for them, so they didn’t have to get out of bed.
Kinda like when they were in school and didn’t bother to show up and figured out having babies at 16 and going on public assistance was the ideal lifestyle….
Comment by Arizona Bob Thursday, Feb 19, 15 @ 8:48 am