Illinois Enacts Tax Reform, A Step In The Right Direction

This past week, Illinois lawmakers approved legislation to raise the state corporate and personal income tax. In explaining the need for the effort, Gov. Pat Quinn explained that the state's "fiscal house was burning." Indeed, faced with a revenue shortfall of $15 billion, legislators garnered the political will to enact sensible means to generate sorely-needed revenue. Though the state faces a number of structural budget issues, compared to the short-term fiscal gimmicks used in the past, this action is undoubtedly a step in the right direction.

The plan will raise $6.5 billion over the next year and primarily consists of temporarily increasing the state's flat personal income tax, from 3 to 5 percent, and corporate tax, from 4.8 to 7 percent. This is the first time in 22 years that the state has raised income taxes.

Conservative governors were quick to respond to the development with typical hyperbole and misleading rhetoric. New Jersey Gov. Chris Christie stated, “I’m going to Illinois, personally, and going to start talking to businesses in Illinois and get them to come to New Jersey.” Both Wisconsin's and Indiana's governors responded with comparable statements. However, as analysts point out, "[t]he notion that low corporate tax rates lure business is antiquated. Taxes pay for improved education systems, transportation, and other services that are important to businesses."

The rhetoric of these right-wing officials parallels their fiscal priorities -- misguided and disingenuous. In states across the country, conservative officials are proposing providing large corporations with enormous tax breaks and reducing or even eliminating corporate income, personal income, and estate taxes. In Michigan, for example, lawmakers are attempting to push through over $1 billion in corporate tax breaks and considering cutting the state’s earned income tax credit (EITC), a policy that not only assists working families, but also has a direct positive impact on the economy. Similarly, Arizona Gov. Jan Brewer aims to balance her state’s budget on the backs of the vulnerable. Brewer has expressed her intent to cut health care for 280,000 Arizonans, while advocating for a slew of imprudent business tax cuts. These proposals would do little more than exacerbate fiscal pain, halt economic growth, and increase the burden on the middle class and working families.

Lawmakers must pursue a balanced approach to fiscal sustainability. Despite outbursts from the Right, utilizing sensible progressive tax reform to invest in public structures and cornerstones of growth -- like education, health care, and transit -- leads to higher economic growth in the long-term and is a far better alternative to massive budget cuts.