Tax and Budget
Released February 16, 2016
In both magnitude and meaning, state elected officials have no greater obligation than passing a General Fund budget into law. Consider magnitude first. Last fiscal year the General Fund budget provided for the expenditure of $35 billion. No question, that constitutes a sizeable expenditure of taxpayer money. It is also meaningful. While nearly $11 billion was targeted for Hard Costs like debt service and other legally mandated payments, over $24 billion was invested in current services across communities statewide. In fact, over 90 percent of FY2015 General Fund expenditures on services covered education (35 percent), healthcare (30 percent), human services (21 percent), and public safety (7 percent). To be clear, it is those services which provide for the basic health and well-being of the citizenry, and go to the very heart of why we elect a Governor and General Assembly in the first place.
By failing to pass a General Fund budget for FY2016, elected officials are basically punting the following difficult, but fundamental, responsibilities to:
- Make decisions about how to allocate scarce resources among the aforesaid four service priorities;
- Identify which of, and by how much, those services will be cut, despite their high priority, if the state’s current woeful fiscal condition is not addressed; or
- Raise the tax revenue needed to fund those core services to the amounts needed to satisfy demographically driven demand.
Capturing Resource Wealth to Invest in the Future: Possible Structures and Potential Benefits of an Illinois Coal Severance Tax
Released October 23, 2015
This report compares the structures of severance taxes in other states and analyzes the potential benefits of instituting a coal severance tax in Illinois.
Released September 9, 2015
This Report offers a solution to Illinois' longstanding fiscal shortcomings. There are a number of common sense, data-driven initiatives that will modernize the tax code—and still keep Illinois relatively low tax. The Report details how changes to Illinois' tax policy, primarily to its income and sales taxes, and re-amortizing its pension debt can completely eliminate its structural deficit.
Released August 12, 2015
This Report provides a detailed analysis of both Governor Bruce Rauner’s and the General Assembly’s two very different proposals for the FY2016 General Fund budget. Both budget proposals would cut services and increase the state’s deficit due to the phase down of the temporary tax increases in the state’s personal and corporate income tax rates that became effective on January 1, 2015. Collectively, those income tax rate cuts will cause Illinois’ General Fund to lose $4.6 billion in recurring revenue over the course of the full fiscal year.
Released May 20, 2015
This report identifies why expanding the base of the state sales tax to include consumer services—like pet grooming, haircuts, country club membership, health clubs, and lawn care—would simultaneously help to stabilize revenue generation for the state’s fiscal system, while reforming tax policy to comport with the modern economy.
As detailed in the report, Illinois is one of 45 states that impose a general sales tax. And while the state-only sales tax rate of 5 percent is below the national average state-only sales tax rate of 5.5 percent, Illinois’ sales tax rate is applied, in large part to the sale of goods (like clothing and furniture) and not services (like pet grooming, health clubs, lawn care, and haircuts). Illinois’ sales tax applies to few services. In fact, of the 45 states with a general sales tax, the average number of service industries taxed is 51; Illinois is an outlier, taxing only five consumer service industries. And that is why the state’s sales tax policy fails to jibe with the modern economy. Indeed, over 72 percent of the Illinois’ economy is derived from the sale of services, while just 17 percent stems from the sales of goods.
Expanding the Base of Illinois’ Sales Tax to Consumer Services Will Both Modernize State Tax Policy and Help Stabilize Revenue, estimates that $2.105 billion in additional revenue could be generated if Illinois’ sales tax base was expanded to include primarily consumer service industries, while excluding business-to-business transactions and professional services. This could go a long way toward addressing the state’s fiscal difficulties. The report also notes that by broadening the state’s sales tax base, Illinois may also be able to reduce the state’s sales tax rate if policy makers so choose.
Released May 14, 2015
This Issue Brief is an update to a 2007 Brief, and provides an overview of who pays property taxes in Illinois, the steps in the property tax cycle, and what property tax revenue is used for.
Released May 6, 2015
PowerPoint presented by Ralph Martire at the Senate Revenue Hearing.
Released April 16, 2015
Recently, a number of states and cities across America have incorporated elements of school choice into their education systems in the hopes of improving student achievement. Starting in 2011 and expanded in 2013, Indiana joined this movement by enacting three bills—House Enrolled Act (HEA) 1001, HEA 1002 and HEA 1003—which, when taken together, create one of the more comprehensive school choice programs in the nation (collectively the “Indiana Choice Legislation”). At its core, the Indiana Choice Legislation utilizes public tax dollars to subsidize school choice. These subsidies come in the form of vouchers, state income tax deductions and state income tax credits.
Indiana’s goal of enhancing student achievement is laudable. It also directly coincides with growing national concern over the academic performance of America’s school children as measured under respected, international benchmarks like the Organization for Economic Co-operation and Development’s (OECD) “Programme for International Student Assessment” (PISA) exam. Indeed, in the most recent PISA exams, the performance of America’s children (considered as a whole) came in at just 27th in math, 20th in science, and 17th in reading.
The question for policy makers in Indiana then, is can Indiana expect its school choice program to enhance student performance or help build a better public education system statewide?
This paper will not utilize in its analysis studies conducted by organizations with a clear bias, be it pro-voucher or anti-voucher. It instead draws on objective, peer-reviewed analyses. The goal is to answer two key questions about the Indiana Choice Legislation as objectively as possible.
First, does the actual documented track record of existing voucher programs demonstrate that those programs in fact achieved the desired goal of enhancing student achievement? Here, the short and clear answer is no.
Second, can voucher programs be expected to enhance student performance or improve public education systems, based on the education reforms implemented in the nations that currently rank in the top five in the world in reading, math, and science under PISA? Again, based on the evidence, the answer is no.
Released February 13, 2013
Independently Authored Materials by Equity and Excellence Commission Members
Issue Brief: Tax Relief from the Phase-down of the Personal Income Tax Disproportionately Goes to Illinois’ Wealthiest
Released February 17, 2015
Many know that on January 1, 2015, the temporary increases made to the state’s income tax rates that became law under the Taxpayer Accountability and Budget Stabilization Act of 2011 (TABSA) began to phase-down. On that date, the personal income tax rate declined from 5 percent to 3.75 percent, while the corporate rate went from 7 percent to 5.25 percent. What is not well known is: (i) who benefited most from the cut to the personal income tax rate under TABSA, and (ii) whether or not that tax cut can reasonably be expected to stimulate the Illinois economy. This Issue Brief reveals that the state's highest income earners will benefit disproportionately from the income tax rate phase-down, worsening income inequality and failing to stimulate the state's economy.