The Case for a Fair and
Graduated Income Tax
League of Women Voters
of Illinois
© 2013, Center for Tax and Budget Accountability
First We Should Acknowledge
"Taxes are the price we pay for
civilization.“
----Justice Oliver Wendell Holmes, Jr.
A Fair and Graduated Tax Could…
 Make the system more fair by taking into account a
person's ability to pay and asking more of those with
higher incomes;
 Bring about structural changes that will help repair the
state's budget long-term;
 Spur the economy by increasing the disposable income
of middle and lower income Illinoisans.
Illinois Taxes are…
 Unfair
 Inflexible
 Inadequate
Unfair because the Top 1% Pay a Smaller Percentage of their
Income in Total State and Local Taxes than the Bottom 20%
Includes all State Sales, Excise, Property and Income Taxes
Source: Institute on Taxation and Economic Policy, Who Pays? A Distributional Analysis of Tax Systems in
all 50 States, p. 52, 4th Edition January 2013
But the top 10% have a huge share
of the country’s income
 "The top 10% of earners took more than half of the
country's total income in 2012...according to an updated
study by the prominent economists Emmanuel Saez and
Thomas Piketty.
 The top 1% took more than one-fifth of the income earned
by Americans, one of the highest levels on record since
1913, when the government instituted an income tax." ...
 "Mr. Saez and Mr. Piketty have argued that the
concentration of income among top earners is unlikely to
reverse without stark changes in the economy or in tax
policy."
from “The Rich Get Richer Through the Recovery” by Annie Lowrey, NY Times 11/24/13.
Illinois taxes are inflexible because…
Our income tax is mandated in the constitution to be a flat tax, which
cannot be changed without a constitutional amendment.
 Our tax system depends on the lowest 80% of its taxpayers, whose
income is eroding, while ignoring where income is growing
 Our tax system overlooks the fastest growing part of its economy –
services - and continues to focus on consumer goods and
manufacturing
Illinois has a structural deficit –
what is that?
“In simple terms, the structural deficit means the
cost of providing public services in Illinois will
grow with the economy and population over time,
but state revenues will not. One of the main
reasons state revenue growth does not track
population and economic growth is Illinois
focuses its revenue collection on a diminishing
portion of the economy—the incomes of low and
middle income families, which are flat or declining
in real terms over time.”
Ralph Martire, Chicago Tribune OpEd, 2/28/2012
Illinois taxes are inadequate because. . .
Illinois has a Structural Deficit
© 2012, Center for Tax and Budget Accountability
And the Flat Income Tax Increase
Expires in 2015.
 Rate Structure Change
 In 2015, the personal income tax rate drops from 5% to 3.75%
 In 2025, the personal income tax rate drops from 3.75% to
3.25%
 Revenue Impact
 Along with reduction in the corporate tax rate, this will result
in a total loss of $7 billion; $2 billion in FY 2015 and $5
billion in FY 2016, far more than the $5.6 billion lost
during the Great Recession *

*The Policy Center for Voices for Illinois Children, Sept. 2013
Was the Temporary Tax Increase Worth It?
0
-5
-10
-15
No Tax Inc.
-20
With Tax Inc.
-25
-30
-35
-40
2011
2012
2013
2014
CTBAonline.org: Analysis of FY2014 Illinois General Fund Budget
FY2014 Accumulated Deficit ($ Billions)
Category
GOMB Revenue
HJR-17 Revenue
(i)
Projected FY2014 Revenue
$35.63
$35.08
(ii)
Projected FY2014 Hard Costs
$11.16
$11.16
(iii)
Projected Deficit Carry Forward from
FY2014
$8.3
$8.3
(iv)
Projected Net FY2014 General Fund
Revenue Available for Services
$16.17
$15.62
(v)
Projected Net General Fund Service
Appropriations
$24.52
$24.52
(vi)
Estimated Minimum FY2014 General
Fund Deficit
($8.35)
($8.9)
(vii)
Estimated Deficit as a Percentage of
General Fund Service Appropriations
-34.05%
-36.29%
Source: Appropriations from and FY2014 CTBA analysis SB 2555, SB 2556, HB 206, HB 208, HB 213, HB 214, HB 215, passed by the 98th General
Assembly; and hard costs from FY2014 GOMB Budget Book.
*This is the 23rd consecutive fiscal year with a General Fund deficit*
© 2013, Center for Tax and Budget Accountability
September 6, 2013
What is the state of the state’s budget?
$35.63B HARD costs (e.g. debt service, pension
$16.17B
Appropriated
24.52B
$0 B
contributions) $11.16B
Unpaid bills which MUST be paid $8.3B
General Fund Budget
K-16 Education
Healthcare
Human
Services
$-8.35B
CTBAonline.org: Analysis of FY2014 Illinois General Fund Budget
Other
$24.47B
Public Safety
(revenue)
Over $9 out of $10 of our General Fund budget
are spent on:
Education
(PreK-12 plus Higher Ed)
35%
Healthcare
30%
Human Services
21%
Public Safety
5%
91%
© 2012, Center for Tax and Budget Accountability
Are we
overspending
on our four
core services?
We’ve actually been cutting since 2000
(Adjusted for Inflation and Population Growth)
Category
FY2014
GOMB
FY2000, Enacted Adj for
Infl (ECI) & Pop Growth
$ Diff FY2013 –
FY2000 Adj (ECI &
Pop Growth)
% Change
$6,686
$7,491
-$805
$1,991
$3,328
-$1,337
-10.7%
-40.2%
$7,171
$8,911
-$1,740
-19.5%
$4,995
$7,112
-$2,118
-29.8%
Public Safety
$1,648
$2,088
-$440
-21.1%
Net Public Services excluding Pensions and
Group Health
$23,177
$32,173
-$8,996
-28.0%
PreK-12
Higher Ed
Healthcare (excluding Group Health)
Human Services (excluding all Healthcare)
Sources: FY 2013 Budget as passed in HR 706, SB2348, SB2413, SB2443, SB 2454, SB2474, SB 2332, SB2378, SB2409, and June
2012 Communications with Legislative staff.
© 2013, Center for Tax and Budget Accountability
Let’s take a
closer look
at education
Since 2000, P-12 has been cut over 10% and
Higher Ed a staggering 40%
Category
PreK-12
Higher Ed
© 2012, Center for Tax and Budget Accountability
FY2013
Enacted
FY2000, Enacted Adj for
Infl (ECI) & Pop Growth
$ Diff FY2013 –
FY2000 Adj (ECI &
Pop Growth)
$6,686
$7,491
-$805
$1,991
$3,328
-$1,337
% Change
-10.7%
-40.2%
Were these cuts justified?
We fund education at $2500
LESS than adequate to give
a basic education (2/3rds of
students without special
needs succeed)*
* According to EFAB: Education Funding Advisory Board
Illinois Ranks #50 in state percentage spending for
education
Worst in the Nation
Source: National Center on Education Statistics, 2011. “Revenues and Expenditures for Public Elementary and
Secondary Education: School Year 2008-2009 (Fiscal Year 2009).”
© 2013, Center for Tax and Budget Accountability
Why is it a problem when local districts pay
most of the cost for education?
 Property taxes account for 92.4 percent of
inequality in local revenue between low- and highpoverty districts*
 The wealthiest districts are able to raise on average
almost $5,000 more per pupil than the highestpoverty districts.
* Baker & Corcoran, 2012, Center for American Progress
Education is Important to Illinois’ Prosperity
Good Education attracts and keeps business
in a state because:
 Businesses locate where there is a skilled
and educated workforce;
 Employees want to be where they’ll find
good schools for their children.
Change in Hourly Median Wage by Education Attainment,
1979-2010 (in real, 2010$)
$
%
Less than High School
-$4.77
-32.8%
High School
-$2.39
-15.5%
Some College
-$1.86
-11.3%
Associate’s or More
$2.84
13%
All Workers
-$0.35
-2.1%
GOTTA LEARN TO EARN!
© 2013, Center for Tax and Budget Accountability
But Education now matters more than ever
to economic prosperity because:
Generally, unemployment rates are
highest for those with the least
education.


The State of Working Illinois, Northern Illinois University 2008, Center for Governmental Studies and Office
for Social Policy Research at NIU, with CTBA
Let’s now
look at
human
services
Human Services:
Serves the Most Vulnerable Citizens of Illinois
 Mental Health Services
 Developmental Disabilities
 Caring for Seniors
 Childcare for Single Working Parents
 Domestic Violence Prevention/ Treatment
 Caring for Abused and Neglected Children
 Substance Abuse and Alcoholism Services
Human services has been cut 29.8% since FY2000
© 2013, Center for Tax and Budget Accountability
Illinois continues to cut funding for
critical human services:
Category
FY2014
GOMB
FY2000, Enacted Adj for
Infl (ECI) & Pop Growth
$ Diff FY2013 –
FY2000 Adj (ECI
& Pop Growth)
% Change
-
Human Services (excluding
all Healthcare)
$4,995
$7,112
-$2,118
-29.8%
With a growing senior population and in a
time of economic hardship, our human
services needs have gone up.
© 2013, Center for Tax and Budget Accountability
Hurting the private sector economy with cuts
Estimated job loss if IL eliminates its deficit by cutting spending
0
-20,000
Jobs Lost
-40,000
-60,000
-56,893
-71,116
-80,000
Estimated job loss by
cutting spending
-100,000
-99,562
-120,000
-128,008
-140,000
$4,000,000
$5,000,000
$7,000,000
Size of IL spending cut
© 2013, Center for Tax and Budget Accountability
$9,000,000
Why are continued cuts to our priority
services ineffective?
For every $1 spent by the government,
the economy gets back $1.36.
=
Investing in public services creates jobs for
people who spend their income on goods &
services. Cutting spending on public services
creates job loss.
*Mark Zandi, Chief Economist for Moody’s
So if it isn’t spending . . .
what
IS the problem?
Illinois Taxes are…
 Unfair
 Inflexible
 Inadequate
What are our Choices?
 Borrowing from financial institutions to pay overdue
bills and cover operating costs
 Continued deferment of payments owed providers
 Further cutting appropriations for services
 Raising Revenue:
 Increase the Flat Tax: (Which Raises Taxes on
Everybody Including Middle and Lower Income
Families)
 A FAIR and GRADUATED RATE INCOME TAX.
© 2012, Center for Tax and Budget Accountability
How is a graduated rate calculated?
(a fictional illustration)*
$50,000
Taxable income
$40,000
8.8%
6.6%
$30,000
4.4%
$20,000
2.2%
$10,000
Average Tax:
4.6%(“effective
rate”)
When you cross into a higher
bracket, only the income
ABOVE that bracket's floor is
subject to the higher rate, NOT
one's entire income.
(“marginal rate”)
1.1%
$
0
* For someone with a taxable income of $50,000
A Fairer Tax Contributes to the Economy
Why?
Lower and Middle income earners spend
most or all of their income for food, clothing, etc.
Taxing them to a lesser degree would enable them to
spend more and therefore stimulate the economy.

Higher income earners and those with greater
wealth save a higher percentage of their income. Their
discretionary spending is relatively unchanged by
marginal tax increases or decreases.

Increasing taxes does not kill jobs or
cause people to flee the state
Businesses come to or stay in a state because:
 They find a skilled workforce
 They find the resources they need
 They find good infrastructure.
 Property taxes are reasonable
People leave a state:
 For employment
 For family reasons
 For retirement
INCOME TAXES ARE NOT A BIG FACTOR!
We Need to Create the
Opportunity
to Have a Fair
and Graduated Income Tax
Change Requires that a Constitutional Amendment be Placed
on the Ballot by the Legislature: SJRCA 40 & HJRCA 33
(a) There may be one tax on the income of individuals and
corporations. This may be a fair tax where lower rates apply to
lower income levels and higher rates apply to higher income
levels. No government other than the State may impose a tax on
or measured by income.
A tax on or measured by income shall be
at a non-graduated rate. At any one time there may be no more
than one such tax imposed by the State for State purposes on
individuals and one such tax so imposed on corporations. In any
such tax imposed upon corporations the rate shall not exceed
the rate imposed on individuals by more than a ratio of 8 to 5.
Timeline for Approving a
Constitutional Amendment
 May 4, 2014: 60% of both houses of the General
Assembly pass a bill calling for a referendum to be
placed on the Nov. 4, 2014 general election (71 votes in
the House and 36 votes in the Senate)
 Nov. 4, 2014: 60% of those voting on the referendum (or
50% of those voting in the election) approve the
referendum
 After the voters give approval, the General Assembly
may craft legislation, establishing a graduated rate
income tax.
What Can You Do?
 1.When talking to legislators, ask whether they are in
favor of a graduated rate income tax. If not, why not?
 2. Go to lwvil.org and look for Graduated Rate Income
Tax information, including links for a slide show, FAQs,
talking points, letter to the editor templates.
 3. Keep an eye on editorials, articles, and letters to the
editor about the graduated tax proposal. Write a personal
letter in opposition to or support of the article, or alert
your League president or the LWV IL (issues@lwvil.org)
to the article so it can be addressed.
 4. See if any other organizations you belong to would like
to be educated on the issue. Please contact the League of
Women Voters at issues@lwvil.org.
5 “take-away” points
 Spending alone did not cause the deficit problem.
 Illinois cannot fix its problem with cuts ALONE.
 Illinois residents should be taxed fairly to keep up
with a modern economy.
 A graduated income tax will NOT hurt the economy
but will actually help it.
 The problem can be solved with comprehensive tax
reform.
© 2013, Center for Tax and Budget Accountability
For resources and more information:
League of Women Voters of Illinois
http://www.lwvil.org/grit-project.html
 Center for Tax and Budget Accountability
www.ctbaonline.org
A Better Illinois Coalition
www.abetterillinois.org
“A Better Illinois” Coalition Members

Access Living ~ Action Now ~ AFSCME Council 31 & Retirees ~ AIDS Foundation of Chicago ~
Anixter Center ~ Associated Firefighters of Illinois~ Bethel New Life ~ Better Funding for Better
Schools ~
Bickerdike Redevelopment Corporation ~ Block Club Federation ~ Brighton Park Neighborhood
Council ~ Center for Tax and Budget Accountability ~ Champaign County Health Care Consumers ~
Chicago Alliance Against Sexual Exploitation ~ Chicago Alliance to End Homelessness ~ Chicago
Coalition for the Homeless ~ Chicago Coalition of Labor Union Women ~ Chicago Federation of Labor
~ Chicago Teachers Union ~ Chicago House and Social Service Agency ~ Chicago Jobs Council ~
Chicago Jobs with Justice ~ Chicago Legal Advocacy for Incarcerated Mothers ~ ChildServ ~ Citizen
Action/Illinois ~ Coalition of Citizens with Disabilities in Illinois ~ Enlace Chicago ~ Erie
Neighborhood House ~ Grassroots Collaborative ~ Heartland Alliance for Human Needs and Human
Rights ~ Hesed House ~ Housing Action Illinois ~ Illinois African American Coalition for Prevention ~
Illinois AFL-CIO ~ Illinois Alliance for Retired Americans ~ Illinois Assistive Technology Project ~
Illinois Maternal and Child Health Coalition ~ Illinois Network of Centers for Independent Living ~
Illinois Public Health Association ~ In His Hands Youth Outreach ~
Independent Voter of Illinois/Independent Precinct Organization (IVI/IPO) ~ Joliet Childcare
Resource and Referral ~ League of Women Voters of Illinois ~ Logan Square Neighborhood
Association ~ Metro Tenants Organization ~ NAACP Peoria Chapter ~ Open Communities ~ Quad
Cities Federation of Labor ~ Responsible Budget Coalition ~ Sargent Shriver National Center on
Poverty Law ~ SEIU State Council & affiliated locals ~ South Austin Community Coalition Council ~
Southsiders Organized for Unity and Liberation (SOUL) ~ State University Annuitants Association ~
Steelworkers Organization of Active Retirees ~ Supporting Provider Network Association ~ Supportive
Housing Providers Association ~ Women Employed ~ and growing!
“A Better Illinois” Supporters

Civic Leaders For A Better Illinois Congressman William Enyart ~ Congressman Luis
Gutierrez ~ Congresswoman Robin Kelly ~ Congresswoman Jan Schakowsky ~ Cook County
Board President Toni Preckwinkle ~ Cook County Clerk David Orr ~ Cook County
Commissioner Jesus Garcia ~ Cook County Commissioner Joan Murphy ~ Cook County
Commissioner Edwin Reyes ~ Cook County Commissioner Deborah Sims ~ Cook County
Commissioner Larry Suffredin ~ Chicago City Clerk Susana Mendoza ~ Chicago Alderman John
Arena ~ Chicago Alderman Howard Brookins, Jr. ~ Chicago Alderman Walter Burnett, Jr. ~
Chicago Alderman Will Burns ~ Chicago Alderman James Cappleman ~ Chicago Alderman
Michael Chandler ~ Chicago Alderman Jason Ervin ~ Jackie Kendall ~ Chicago Alderman Toni
Foulkes ~ Chicago Alderman Deborah Graham ~ Chicago Alderman Natasha Holmes ~ Chicago
Alderman Margaret Laurino ~ Chicago Alderman Roberto Maldonado ~ Chicago Alderman Joe
Moore ~ Chicago Alderman Ricardo Munoz ~ Chicago Alderman Ameya Pawar ~ Chicago
Alderman Roderick Sawyer ~ Chicago Alderman Debra Silverstein ~ Chicago Alderman
Nicholas Sposato ~ Chicago Alderman Scott Waguespack ~ Sen. Art Berman ~ Rep. Paul
Froelich ~ Lauren Beth Gash ~ Democratic Committeewoman Carol Ronen ~ Park Forest
Mayor Roy Ostenburg ~ Bloom Township Trustee Kevin Watson ~ Rock Island City Councilor
Brian Vyncke ~ Rock Island City Councilor Jeffrey Stulis ~ Silvis Mayor Tom Conrad ~ Silvis
City Councillor Caryn Unsicker ~ Silvis City Councillor Kathy Hall ~ Jane Ramsey ~ Will
County Board Member Jackie Traynere ~ Betsy Lassar ~ Ann Dempsey, President Greater
Rockford League of Women Voters ~ and growing!
“A Better Illinois” Supporters

Small Businesses For A Better Illinois Coco Soodek, Profit and Laws, Inc. ~ Alex’s Auto Body

Faith Leaders for A Better Illinois Rev. Jerome Adams, Lighthouse Church of Chicago ~ ARISE
& Repair ~ Bergstein’s New York Delicatessen ~ Bloodshot Records ~ Chicago Press ~ Colvin’s Printing ~
Edward Ark Collections, Inc. ~ Ekonomisk Management ~ David Borris, Hel’s Kitchen Catering ~ Holistic
Health Care ~ Hedy Ratner ~ Lincoln Park Chamber of Commerce ~ Karen Miller, Eberhart Accounting
Services ~ MyBestRx ~ Nina Gapshis, Progress Printers, ~ Randall Talcott, Three Oaks Advisors, LLC ~ Kevin
Wilder, Wilder Inc. ~ Joshua Cynamon, Vantage Insights LLC ~ Steven Gross, Steven Gross Inc. ~ T and A
Transportation ~ Thomas Franklin, Thomas H Franklin & Associates, LLC ~ VJ Ware Transportation, Inc ~
Marla Wilson, Advertising Specialty Creations ~ and growing!
Chicago ~ Rev. Alexander Ballok Jr., St. John’s UCC ~ Rev. Frances Bates, Community Protestant ~ Herb
Best, Congregational Church of Christ ~ Rev. Erik Christensen, St. Luke’s Lutheran Church of Logan Square ~
Community Renewal Society ~ Rev. Clint Collins, St. Peter Community Church ~ Rev. Susan Detterman,
Community Congregational UCC ~ Rev. Donald Farley, St. Paul’s UCC ~ Rev. Jason Coulter, Ravenswood
United Church of Christ ~ Rev. Chris Fox, First Congregational UCC ~ Rev. Dr. Terrence Gallagher, New
England UCC ~ Rev. Franklin Gamwell, Presbytery ~ Paul Henning, Ravenswood Presbyterian Church ~ Rev.
Janet Hisbon, Faith Community UCC ~ Rev. John Holm, Joy! Lutheran Church ~ Rev. Michael Hoye ~ Rev.
Jan Johnson, St. John UCC ~ Rev. Kristian Johnson, Pilgrim Lutheran Church ~ Jewish Council on Urban
Affairs ~ Rev. David Inglis, First Congregational Church UCC ~ Rev. Kevin McLemore, Epiphany United
Church of Christ ~ Conference Minister Jorge Morales, IL Conference UCC ~ Rev. Rev. Nancy Pfaltzgraf ~ Dr.
Rex Piercy, Congregational UCC ~ Jonathan Knight, Fox Valley Association ~ Northern Illinois Conference of
the United Methodist Church ~ Project IRENE ~ Rainbow PUSH Coalition ~ Rev. Dr. Ann Roswell, First
Congregational Church UCC ~ Pastor Mark Schol, Grace United Methodist Church of Logan Square ~ Rev.
Kara Wagner Sherer, St. Johns Episcopal Church ~ Rev. Sally Sheib, Bethel United Church of Christ ~ Rev.
Arthur Stratemeyer. Plainfield Congregational UCC ~ Pastor Anthony Sullivan, God Can Ministries UCC ~
Unitarian Universalists for Social Justice ~ Rev. Booker Vance, SOUL ~ Rev. Gene Winkler ~ Rev. Mark
Winters, First Congregational UCC Naperville ~ Rev. Wendy Witt ~ Rev. Tim Yeager ~ and growing!
“A Better Illinois” Supporters
 Educators For A Better Illinois Illinois Action for Children ~ Voices for
Illinois Children ~ ABC 123 Daycare, Inc. ~ Bottles Diapers ‘n’ Pins ~ Common
Sense Coalition of LSCs for Fair Funding ~ ~ Decatur School Board Member Fred
Spannaus ~ Decatur School Board Member Alida Graham ~ Dot's Daycare ~
Forchias Little Angels ~ Foundation Daycare ~ God’s Little Lambs Home Daycare ~
Grannie’s Babies Daycare ~ Hayes Home Daycare ~ Heaven on Earth Childcare ~
Heavens Angels Daycare ~ Home for Tots Daycare ~ Honey Bees House of
Learning, Inc. ~ House of Kids Childcare And Learning Center ~ Illinois Education
Association ~ Illinois Federation of Teachers ~ Illinois Federation of Community
Schools ~ Judy's Daycare ~ Jump Smart Family Child Care ~ Kiddios Academy ~
Little Ladies and Gents Home Daycare ~ Mary's Little Lamb Home Daycare ~ Jack
Metzgar, Emeritus Professor of Humanities Roosevelt University ~ Pat’s Home Day
Care, Inc. ~ Raise Your Hand Coalition ~ Renee's Rainbow Daycare and
Development ~ Shelbyville School Board Member Rob Bosgraaf ~ David Bon- nette,
Retired Superintendent of Riverside School District 96 ~ Patrick Patt, Retired
Superintendent of Oak Grove School District 68 ~ David May, President Lagrange
School District 102 ~ Jack Metzger ~ Marleis Trover, Chair, Education Leadership
Department, Eastern Illinois University ~ Scribbles Daycare Inc. ~ Sherae's Little
Angels Daycare ~ Taras Day Camp ~ The Babies Club ~ The Giving Tree Home
Daycare ~ TJs Heavenly Angels Daycare ~ We are the World Home Daycare ~
Weezie Breezies Daycare, Inc. ~ and growing!