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Friday, April 13, 2007

Mr. Madigan on Taxes

Mike Madigan, the Speaker of the Illinois House, told his audience in Lake County yesterday that we will see a tax increase out of the legislature this year. He's not sure which it will be, the Governor's misguided Gross Receipts Tax, or the (not quite a) swap plan which recently left committee, which would raise the income tax to 5% from it's current 3%.

"Before we finish our budget in May or June, Illinois is going to see a tax increase," he said.

One of Madigans more disturbing comments yesterday was this, "There has never been a tax for education legislation that I ever voted against." While I'm glad he's dedicated to education maybe he should also start voting FOR legislation that includes accountability for our money, and the education our children receive.

Unfortunately Mr.Madigan, like most of his party, is too beholden to the money of the Illinois Federation of Teachers and NEA. Any suggestion of actual meaningful reform that includes accountability will lead to a quick drop off in campaign contributions.

While taxes probably do need to go up in the state due to our fairly low income tax rate, the truth is just like businesses, there are a lot of personal loopholes in the system that could be tightened up before we jack every one's taxes up. Because our state Constitution requires on tax rate for everyone to do this would require making the tax code more complex, but probably less regressive than it is now.

For instance, one of the reasons I live here is my military retirement pay isn't taxed at all. The state could fairly easily tax pensions, based on a persons actual income. For instance if pensioners don't make over 200% of the poverty level (about 38 grand for a couple) in total income they aren't taxed at all. As the income goes up, the percentage of pension taxed goes up. There is probably a hundred million or so in new income, that isn't coming out the pockets of "poor retirees".

Since the Governor wants to use 400% of the poverty level as the cut off for the health care program he'd like to start, why not use it as the starting point for limiting child tax credits and deductions for things like day care? There's a few hundred million more, without jacking the rate on the bottom end of the wage scale.

One of the problems not addressed by either the gross receipts tax or the "tax swap" is that both make the system even more regressive than it already is. Lower income people end up either paying more for goods because of the GRT, or more income tax with the supposed swap.

Both promise some sort of property tax relief, but at the lower end of the income scale that really doesn't matter; they probably don't own their own property, so they'd have to hope that that tax savings are "trickled down" to them by have rent go up less.

Of course the true solution is a rewrite of the State Constitution to fix the way we can tax, instead of making a bunch of hodge podge changes to the tax code. Unfortunately I doubt we'll see a call for a Convention on the 2008 ballot to do just that.

Technorati Tags: Illinois, Taxes, Michael Madigan, Rod Blagojevich, Tax Swap, Gross Receipts Tax

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