Illinois Cultural Issues

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"Creative Ideas for Tax Relief"   by Joyce Geiler

     What is a state to do when legislators want high taxes with no will to cut spending? Some legislators propose creative ways to increase revenue that are usually tied to increasing taxes. Several of those ideas will be discussed in this article.

Increased Property Tax
     The average property tax bill paid in Illinois jumped by nearly 50 percent between 2008-2015. Passed in 1991, the Property Tax Extension Limitation Law (PTELL) established a tax cap limiting the rate at which certain taxing districts can increase property tax in Cook County and the surrounding counties. Since 1996, voters in other Illinois counties have voted to implement PTELL. For counties subject to PTELL, annual property tax growth may not exceed 5 percent or the rate of inflation, whichever is less. There are exceptions to this, such as taxes for payments on bonds approved by voters, as well as tax increases approved through voter referendum. Since its passage, PTELL has extended to 39 counties.
     But as residents in these counties have discovered, even the limitations imposed by PTELL on tax increases have failed to prevent property tax bills from soaring beyond the affordability of taxpayers. In fact, many households have seen property tax bills rise in spite of declining property values. Since under PTELL counties are not allowed to reduce property taxes, an amendment to SB 2670 (the PTELL law) has been proposed that would allow PTELL counties to reduce property taxes by voter referendum. The proposed amendment is still processing in the Senate. Read more here

Gasoline Taxes and Licensing Fees
     How about increasing gasoline taxes and licensing fees? The Illinois Economic Policy Institute proposes more than doubling the state’s motor tax from 34 cents to 85 cents per gallon with an additional 15 cents for diesel fuel suggesting the increased revenue could take care of the state’s backlog of infrastructure improvements. In 2017, The National Tax Foundation ranked Illinois’ gasoline tax at eleventh highest in the nation. Increasing the tax to 85 cents would make it higher than the 2017 highest state of Pennsylvania, which was at 58 cents at that time. Another idea proposed was to increase vehicle licensing fees from the current $101 to $578 per year. Are they serious?
More information here

Miles Traveled Fees
     Another proposal of the Institute is a vehicle miles-traveled fee of 4 to 5 cents per mile. A number of states are looking for an alternative to the gas tax, because the per-gallon taxes often do not keep up with inflation, and they are bringing in less money as cars become more fuel-efficient. Questions that need to be answered are numerous. How will the mileage monitoring be accomplished without compromising consumer privacy? Will fees be paid monthly or as part of annual income tax? What expenses will be incurred by the state to implement such a program? How will compliance be monitored? How would such a program be phased into use? Read more

Two-Year Vehicle Registrations
     The Illinois General Assembly has been working on something less grandiose but more helpful. House Bill 4259 and Senate Bill 1505 would give motorists the option of getting a two-year vehicle registration, instead of having to get a new sticker every year. Both measures passed their respective chambers unanimously. Postage is one of the biggest line items in the Secretary of State’s budget. In 2015, the Secretary of State’s office reported postage costs for registration renewal notices was more than $450,000 a month. Mailing out license stickers half as often should save the state considerably. Trailers can be licensed for up to five years but because EPA emission tests standards in Chicago and East St. Louis are required every two years for licensing, autos must be limited to two-year renewals. The measures do not apply to large commercial vehicles. More here

Progressive Income Tax
     A progressive income tax that would place a higher tax burden on upper income earners is touted as an answer. Proponents have been silent in delineating exactly what that percentage of tax increase would be and exactly what income brackets would be targeted, but it is still possible to estimate what kind of help such an increase would give to Illinois’ financial status. An April, 2018 article  in Crain’s Business gives the following example:
     Assume only taxpayers with over $150,000 in annual income get a tax increase even though many of those aren't millionaires. According to data obtained from the Illinois Department of Revenue, Illinois has 552,000 taxpayers reporting that much income, which is about the top 9 percent of all taxpayers. How much more in taxes would each of those “high income” taxpayers have to pay per year to “fix” the state’s finances? It would take $587,300 from each of the 552,000 top taxpayers: $453,000 to cover Illinois’ unfunded pension liabilities; $101,000 to cover unfunded healthcare obligations for state workers; $15,000 to cover the current backlog with the Illinois comptroller; $12,000 to cover the amount Illinois has been running in the red for the past 10 years; and $6,300 per year for 10 years to reach "adequate" funding under the new formula for schools.
     The amount needed per “wealthy” taxpayer to cover campaign proposals for universal health care, early childhood education, better funding for schools and a tax cut for the middle class is not known. It seems a bit preposterous to believe that a progressive income tax could take care of all those liabilities. In addition, a proposal to change Illinois’ income tax from its current flat tax to a progressive tax requires the expense of a constitutional amendment.

Conclusion
     It’s a lot easier to propose raising taxes than to actually address problems in existing spending. Illinois has already suffered the lowering of credit rating due to several years of having no budget. When there is a budget, there is still overspending. People are leaving the state because of high taxes and unfavorable business conditions that include taxes and regulations. When will lawmakers and the citizens who elect them realize “enough is enough”?
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