So far, the vast majority of what has been “on the table” of our state politicians have been spending cuts. Despite many ways to increase revenue that have been suggested by many intelligent individuals, they individuals do not have the political office nor do they seem to have the ears of those who do hold office.
Among the ways to increase revenue include reasonable things like increasing taxes on tobacco, alcohol, and the activities going on at the newly furnished Illinois casinos; including more forms of income into the state tax base; cracking down on corporate tax breaks and accounting loopholes that have been exploited; and that doesn’t even mention what may be the most logical and beneficial solution.
A February 2012 article from the CTBA, “The Case for Creating a Graduated Income Tax in Illinois” excellently detailed that solution. By implementing a progressive, or graduated-rate, state income tax, Illinois could raise $2.4 billion and at the same time reduce the amount 94% of Illinois taxpayers would pay. Those seem like impossible numbers where 94% of people pay less money and almost two and a half billion more in tax revenue.
I don’t want to be accused to inciting “class warfare” as some GOP candidates have said of Obama (I’m not going to get into national politics, promise), but it sure seems pretty close to the 99% vs the 1% movement. The 6% of Illinois citizens making over $150,000 in base income would pay greater amounts in state tax while those underneath for the most part would pay a lower amount. The taxpayers in the lower 94% would see a collective $1.06 billion dollar relief in tax payments.
I’m more of a finance guy than an economics guy, but it stands to reason (in my mind) that giving $1 billion to the lower 94% who need it more and taking $2.4 billion from the top 6% who have the financial wherewithal to withstand higher taxes would result in these things:
- Economic stimulus through extra disposable income for 94% of citizens
- Economic stimulus through additional revenue for the state
- Dual economic stimulus creates private sector jobs
And the cycle towards an improved economic situation in Illinois could build from there. But what does this have to do with the Illinois Teachers Retirement System. The best way towards improving a state budget is through employing both strategies: increase revenue and decrease spending. Governor Quinn and other state politicians have made it abundantly clear they are ok will cutting from all different parts of the budget.
The state has made a commitment to their employees and they should keep it. The Illinois Teachers Retirement System is in trouble now but through increased tax revenue, the state isn’t that far off from making the full contributions needed to be on pace for the goal of having the fund be 90% funded by 2045.