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=C2=AB=20 In what way is Chicago obsequious? | Main =

Originally posted: October 25,=20 2007

The low down on Illinois' `low taxes'

Is Illinois a low-tax=20 state?

The very question drew a derisive laugh Wednesday from = Jim Tobin,=20 president of National Taxpayers United of Illinois. = =E2=80=9CI=E2=80=99ll tell you=20 what,=E2=80=9D he said. =E2=80=9CGo out, stop people on the = street and ask them if=20 they live in a low-tax state. They=E2=80=99ll tell = you.=E2=80=9D

I didn=E2=80=99t bother, not needing to hear any more = derisive=20 laughter. Most folks, weary of being nicked and bled = and=20 drained by collectors at every level of government, believe = there=E2=80=99s=20 no such thing as a low-tax state. No need to take a = survey for=20 that.

But the question asks for more than gut feeling: Compared = to=20 other states, are taxes in Illinois particularly high, = particularly=20 low or about average?=E2=80=99

And unless the person on the street happens to be a=20 economic-policy wonk familiar with national studies = comparing tax=20 burdens, he=E2=80=99ll have no idea of the answer =E2=80=93 = same as I had when I=20 started asking around this week.

Tribune archives show the question of whether Illinois is = a=20 comparatively high-tax or low-tax state has been debated for = decades.

Yet it seems particularly relevant now that city, county = and=20 state lawmakers are all looking to raise new revenue and = casting=20 their hungry eyes on our wallets: By national standards, are = we=20 already overtaxed?

Tobin=E2=80=99s policy-wonk answer: Yes, but just = barely.

=E2=80=9CWe have the 22nd highest (combined state and = local) tax burden=20 of the 50 states,=E2=80=9D he said. He directed me to tables = published=20 online by the Tax Foundation, the same 70-year-old = Washington-based=20 research group cited by the Illinois Policy Institute = several years=20 ago when it branded the idea of Illinois as a low-tax state = as =E2=80=9CThe=20 Big Lie.=E2=80=9D

Does that settle it? No.

The most recent calculation of the Federation of Tax=20 Administrators -- also a 70-year-old, Washington-based = research=20 group -- says that Illinois comes in 45th = when you=20 rank the states and the District of Columbia by state and = local tax=20 burdens. Only Connecticut, Missouri, South Dakota, = Tennessee,=20 Maryland and New Hampshire are lower.

Both tax-analysis groups do their calculations by looking = at the=20 amount that everyone earns, taken altogether, = and=20 comparing it to the amount that state and local government = take=20 back. Their results differ because their methodologies = aren=E2=80=99t=20 identical in ways that might bore even those interested = enough in=20 tax policy to have read this far.

=E2=80=9CThe Federation of Tax Administrators has the = most thorough and=20 accurate data set out there,=E2=80=9D said Ralph Martire, = director of the=20 Chicago-based Center for Tax and Budget Accountability. = =E2=80=9CThey=20 include every tax, every government fee. And the truth is, = we=E2=80=99re a=20 low-tax state.=E2=80=9D

One reason many seem to find this unbelievable, Martire = said, is=20 that, for many, it=E2=80=99s actually not true:

Because Illinois levies a flat 3% tax on income and = because most=20 of our other state and local taxes and fees sock the poor as = hard as=20 the rich, =E2=80=9Cwe=E2=80=99re actually a high-tax state = for low and middle income=20 people,=E2=80=9D Martire said.

Figures to support this appeared in a 2005 study by = the=20 District of Columbia that looked at the state and local tax = burdens=20 on hypothetical three-person families living in the biggest = cities=20 of each state: Illinois (Chicago) had the 5th highest burden = on=20 those earning $25,000 a year but only the 35th highest = on=20 those earning $150,000 a year.

What does this mean? Not that we=E2=80=99re necessarily = getting a good=20 bang for our buck from government -- that=E2=80=99s a = different=20 issue. To say our taxes are low (or even just average) = is not=20 to say they are low enough.

It means that we=E2=80=99re in a position to put every = option for tax=20 reform on the table. It means that we should be able to look = without=20 hysteria or handwringing for the best way to share the = burden of=20 paying for essential services.

Let=E2=80=99s not strive to be the lowest or the highest = tax state. Just=20 the fairest.
-------
Feelin=E2=80=99 wonky? = I=E2=80=99ve got a great=20 Webliography of links to groups and studies mentioned above = as well=20 as more quotes from experts posted here.=20

in COLUMNS=20 | Permalink =20

Comments

Your last three paragraphs say it best.

The most relevant question is how much of our hard-earned money = is=20 wasted due to redundancy, incompetence, corruption, graft, theft, = Daley,=20 Stroger, Blagojevich, etc.

Regardless, I think a good starting point would be to elect = candidates=20 like Byron "Low Tax" Looper, so at least we know where they stand = on the=20 issue. What could go wrong?

Posted by: Kip=20 | Oct 25, 2007 12:10:46 AM

You did all that research to justify your liberal belief in the = redistribution of income?

ZORN REPLY -- No, I did all that research because, unlike = certain=20 people, I don't like to answer every question with slogans and = labels; I=20 thought I'd take a look at what the data actually show. Glad you = got to=20 the end of the column, though, Fred. Maybe you learned something, = too.=20

Posted by: Fred | Oct 25, 2007 = 4:54:55 AM

Don't know the answer, but the question makes me feel you are = defending=20 government by trying to prove we are not over taxed.
.
Every = state=20 overtaxes overtaxed citizens. And anyone who disagrees should pay = a fine=20 to the treasury.

Posted by: Tory = | Oct 25,=20 2007 5:23:19 AM

I do not believe all of the government services that are trying = to be=20 preserved are essential. It seems to me that nobody is trying to = cut the=20 mamoth size of state and locol government, but politicians are = trying to=20 protect their feifdoms. Todd Stroger wants to add county = employees? Tell=20 these leaders the cuts are not draconian and lets get things under = control. I have to live within my budget so should they.

Posted by: Charlie | Oct 25, 2007 6:32:40 = AM

Hey Eric

How about this for a radical idea? Why doesn't Illinois strive = to have=20 the fairest and the lowest tax burden? Or do you think those = concepts are=20 somehow mutually exclusive?

Also, Ralph Martire has never seen a tax he wouldn't support so = get an=20 "expert" without such a well documented record of lobbying for tax = hikes -=20 that is if "fairness" is an important goal.

ZORN REPLY -- Matire opposed the GRT, he opposes the 2 percent = hike in=20 Cook County Sales taxes, just to name two off the top of my head.=20

Posted by: philadams | Oct 25, = 2007=20 6:50:04 AM

Now look at totally inefficient Chicago and figure out why = taxes are so=20 high there! Why is the price of gas so high there compared with = the rest=20 of the state? It's the rest of the state that saves us from being = the=20 highest, where things are done more efficiently.

Posted by: witz | Oct 25, 2007 6:53:04 AM

I am watching long time established businesses close and = homeowners=20 forced out of their homes due to excessive property taxes. At what = point=20 do we realize that government is taking more money than people can = spare?

Posted by: Ratty | Oct 25, = 2007=20 6:54:31 AM

Flat would be everyone pays $50 in taxes. Paying 3% is not = flat.=20 Neighbors pay different amounts for the same exact services. = Graduated tax=20 rates make taxes *more* unfair.

Posted by:=20 Chuck | Oct 25, 2007 6:54:45 AM

Illinois not a high tax state? After living in the south for = eleven=20 years - and not being able to stand any more "southern = hospitality", my=20 wife and I decided to change jobs and move back north to raise our = kids.=20 Despite both of us being raised in the Chicago suburbs we didn't = even=20 consider moving back to Illinois because of the ridiculous = property=20 taxes.

Posted by: Hawk | Oct 25, = 2007=20 7:04:50 AM

Your point of comparison among states is excellent because = Illinois=20 politicians need to understand that our state does not operate in=20 isolation. There is vigorous recruiting by low-tax states of = businesses=20 and large employers which operate here, offering not just lower = taxes but=20 lower cost of living, debt-free buildings, lower utility costs and = an=20 array of other benefits. California, for example, has experienced = a=20 significant loss of businesses because it has taxed itself out of=20 competition with Nevada. Politicians, in contemplating tax = increases, must=20 keep a more universal picture in mind.

Posted by: Grover C. | Oct 25, 2007 = 7:32:37 AM

Illinois is a low tax state. Coming from the East Coast, the = taxes here=20 are laughably low.

With that said, what prosperity we have is largely due to that = low tax=20 burden. If you want to see what happens when you raise taxes, just = go to=20 our neighboring states. Look at the rankings. Indiana, Wisconsin,=20 Michigan, etc. all rank much higher in taxes. And you know that if = you=20 visit there, they're just nowhere near as economically vital as=20 Illinois.

Posted by: Buzzcut | = Oct 25, 2007=20 7:52:23 AM

Perhaps we should remember this when we are being asked to = elect, or=20 re-elect Blago, Stroger & Daley. Perhaps we should have = thought of=20 this when Blago's campaign promised more programs and gave no idea = how to=20 pay for them.

Posted by: JJH | = Oct 25,=20 2007 8:01:21 AM

There's a difference between taxes and fees. Martire's numbers = include=20 both. Illinois is in the middle of the pack for taxes. Fees are = not taxes,=20 so let's quit pretending they are just because it serves our = purpose to do=20 so.

ZORN REPLY -- They're the same as taxes for all intents and = purposes.=20 Why would you object to counting them as a way govt. nicks you? Is = having=20 to pay for your city sticker a tax or a fee? And what's the = practical=20 difference?

Posted by: johnny | = Oct 25,=20 2007 8:01:45 AM

Zorn's ends his column "Just the fairest." A flat tax, like = Illinois'=20 3%, is very good. Bigger earners pay more tax. Why do we need an = unfair,=20 "progressive" tax system (that might tax the highest earners 10%, = when=20 they are already paying more tax at 3% than anyone else), like the = federal=20 government's current policy? By the way, look at "Tax Cuts: A = Simple=20 Lesson in Economics"
at=20 www.authorsden.com/visit/viewarticle.asp?id=3D13505
or http://www.suite101.com/article.cfm/investing/111646.<= /P>

Eric, you mention good stuff in your columns, but with this, = you're in=20 way over your head.

ZORN REPLY -- Sorry, but I don't take advice on what's over my = head or=20 not from advocates of flat income taxes.

Posted by: Ben | Oct 25, 2007 8:02:12 AM

I have looked at the various states that tax retired folks = income at:=20 https://www.retirementliving.com/RLtaxes.html
Alaska was the = lowest=20 taxing state. I was surprised not see Alaska as the lowest taxing = state=20 body in this column. Alaska does not have a state income tax. In = fact each=20 resident gets a PFD check each year which comes from oil = royalties. In=20 2007 it was $1654.00. The State of Illinois does have fairly low = taxes,=20 but it is the local taxes that will clean out your savings. For = example=20 living in Chicago with Daley's taxes on top of Stroger's taxes. = The lesson=20 learned here is to retire down state or at least 150 miles from = the=20 Chicago area.

Posted by: Piconerd = | Oct 25,=20 2007 8:02:34 AM

One may look at the glass half empty or the glass half full Mr = Martire.=20 I'm one of those glass half empty kind of Taxpayers.
Illinois = is ranked=20 the 28th worst for Business Tax Climates in the Country. Illinois = has the=20 10th highest ranking for Property Taxes.

But perhaps Taxpayer perception is the critical factor? = Consider I have=20 a 4 year old 2200 Sf 4 Bd 3 Bth house ON Lake Lanier, in Hall = County,=20 Georgia. Taxes last year: $1490. House in the country in Winnegago = County,=20 Il: $5950. My Taxes in Dallas on my house are high, but there is = no State=20 Income Tax. Gas is always $.30 cheaper in Georgia and Tx than in = Il, on=20 and on I could go.
I mix and match Fees, Insurance, etc. to the = most=20 advantageous address.
My conclusion, living in various regions = of the=20 Country, is that Illinois is extremely high.

Posted by: D Traeger | Oct 25, 2007 = 8:14:15 AM

"... because most of our other state and local taxes and fees = sock the=20 poor as hard as the rich." If only this were true, we'd have the = fair=20 system you claim to strive for. Also, please define "essential = services"=20 in your last sentence. Do they include the Hostess donuts = purchased with a=20 Link card by the woman in front of me at Dominicks this morning = (who later=20 bought $20 of scratch-off lottery tickets)?

Posted by: John | Oct 25, 2007 8:29:11 AM

Anyone who cannot see the effect that all the new taxes in = Illinois are=20 having is a fool. It will not be that long till the stranglehold = of taxes=20 cause a slow down of spending. Add to that all the new energy = costs and=20 the legacy commitments that society now has and you better hang on = tight.=20 Let's not toss those percentages around lightly. Taxes need to go = down!=20

Posted by: Jeff | Oct 25, 2007 = 9:03:29 AM

How about asking the REAL question. Is Chicago a low tax city? = HAHAHA.=20 Adding in the county and city excessive taxes changes the scenario = for=20 Illinois being a "low tax" state.

Posted=20 by: jim | Oct 25, 2007 9:06:05 AM

I think that people who make under 35 grand a year should be = exempt=20 from all income tax.

Posted by: = Jack O'B |=20 Oct 25, 2007 9:08:09 AM

Thank you for giving us some data. Although we pay and pay = taxes in=20 many different forms I know that we could reduce taxes = dramatically if we=20 had honorable people representing us. When we see the weekly = reports of=20 corruption that permeates every facet of our state everyone must = realize=20 how different it could be. If what I suggest is true why don't we = do=20 something about it? Elect ONLY honorable people not the relatives = of those=20 already in power. Think of Illinois as an iceberg with Attornet = Fitzgerald=20 having exposed only the very tip and 99% still lies unexposed. God = bless=20 us in this effort.

Posted by: = James Poulsen=20 | Oct 25, 2007 9:12:23 AM

Eric, this blog and your previous post certainly makes one = thing clear=20 - the metrics can be manipulated so as to support any number of = agendas.=20 However, the data also appears to shed light on a couple of items = that are=20 less in dispute:

1) Taxes incurred by Illinois residents appear to be = disproportionately=20 burdensome to the middle and lower classes; and

2) A large portion of the tax increases proposed at the city = and county=20 level (gas tax, bottled water tax, parking tax, etc.) would serve = to widen=20 the aforementioned gap, not shrink it.

There's undoubtedly waste, fraud, corruption, and cronyism = within the=20 government that could and should be abridged to help alleviate the = looming=20 deficits. And Chicago has a long and sordid history of such = practices, not=20 to mention Daley's myopic and reckless agenda (i.e. 10-year union = labor=20 deal, overuse of TIFs) in an effort to make the city "world-class" = (a=20 childish and preposterous notion), land the Olympics, and secure = his=20 legacy.

I sincerely hope that the policy makers that peruse your column = will,=20 at a minimum, consider some sort of tax reform in advance of = extricating=20 the cash from our wallets. It's not a question of partisan = politics;=20 rather, it's a question of quality of life.

Posted by: Dan | Oct 25, 2007 9:16:52 AM

Illinois tax state's tax rates are reasonable within a country = that=20 imposes the lowest taxes in the developed world. Americans = (especially=20 rich ones) pay less in taxes than citizens of other countries, but = they=20 whine the loudest.

Posted by: = Conrad=20 Weisert | Oct 25, 2007 9:32:21 AM

Each of you angered by Eric=E2=80=99s message, please focus on = the last three=20 paragraphs of the article wherein the thesis is clear. = Specifically, that=20 the comparatively high or low effective tax rate paid by Illinois=20 residents should not be the barometer to determine whether = Illinois=20 residents are paying too much in taxes. Instead, the barometer = should=20 instead be =E2=80=9Ctax fairness.=E2=80=9D =E2=80=9CTax = fairness=E2=80=9D does not per se mean that every=20 resident should pay the exact same amount of tax. =E2=80=9CTax = fairness=E2=80=9D means, in=20 part and to a greater extent, that a government=E2=80=99s = obligation is to=20 identify the services it necessarily must provide to its citizens = (namely,=20 police protection, fire protection, and education) and assess = revenue=20 needs accordingly. For a government to believe and/or claim that = it is=20 best situated to address the vast socioeconomic ills of a society = by=20 demanding near incomprehensible sums of revenue from its citizens = is=20 extraordinarily unconscionable and yes, unfair. Prior to the trend = of=20 government in the late 20th century to confuse its role in society = with=20 the role previously and successfully occupied by both the = communities via=20 self-initiated action and the capital markets, the role of = assuming=20 responsibility for the unemployed, the sick, the poor, = =E2=80=9Cthe least among=20 us,=E2=80=9D the communities and capital markets addressed the = socioeconomic ills.=20 The crux of the communities and the capital markets has not = changed in=20 centuries and there therefore is certainly no defensible reason = for=20 government to change by stepping into the shoes of the communities = and=20 capital markets advertising that the only way for people to = prosper is for=20 taxes to increase and for new taxes to be established. Shame on = the=20 politician who thinks so little of its citizens, shame on the = politician=20 who inflicts this unfairness.

Posted by:=20 State Income Tax Lawyer | Oct 25, 2007 9:32:29 AM

The low down on Illinois' `low taxes'

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