There has been a lot of discussion lately regarding the Illinois and Chicago budget crisis and I felt as though this needed further consideration. Now the media has been certainly portraying Governor Quinn’s proposed income tax increase as the worst possible scenario (back when this was still on the table, that is), and I believe most people feel that it is. The main opinion is that an income tax increase would cause strain on the citizens of the state and that the government needs to just cut spending. Now, besides for the fact that the proposed 2 percent increase would be barely noticeable to the majority of the population (and those in the lower-classes can receive relief through programs such as the EIC), what isn’t really being discussed is that THERE IS NO OTHER WAY OUT.
I am going to use data directly from the State of Illinois Budget Book so there is no confusion or accusation of receiving skewed information from the media. My goal is to simply demonstrate how difficult and complicated government budgets are and to hopefully give you a small understanding of why tax increases were being proposed (which they’re not anymore due to political pressure, being in an election year and all).
At last count, the deficit for 2010 is at $11.5 BILLION. Billion. The total operating budget is $24.8 billion and the total capital budget is $30.4 billion. To give you a basis for comparison, the 2009 operating budget was at $31.5 billion and revenues were $27.2 billion.
This is taken directly from the governor’s budget proposal:
“The governor’s fiscal 2010 budget proposes increasing the personal exemption from $2,000 to $6,000 [read: tax savings for you]. The budget also proposes increasing the income tax rate by 1.5 [this has since been increased to 2 percent] percentage points for individuals, and 2.4 percentage points for corporations.
This exemption means that a family of four making $24,000 per year would pay no income tax in Illinois. Currently a family of four making that amount per year pays $480 in state taxes.
It is estimated that the increase will generate an additional $2.8 billion in individual income tax receipts in fiscal year 2010, and $350 million in corporate income tax receipts.”
The goal of the above proposal is to ensure that those that can’t afford to contribute more in income taxes won’t. And those that are living much more comfortably, will contribute more, but in all reality, not that much more. 2 percent. Think about that. If your boss told you that you were getting a 2 percent pay raise, you would laugh in their face. You know why? Because that amounts to virtually nothing noticeable.
Now please understand that this does not mean that spending cuts should not also happen. And they have. Again—this is taken directly from the budget proposal.
Requiring state employees to take four furlough days: $36 million
Increasing healthcare contributions for state employees and state retirees: $200 million
Targeted reductions and other efficiencies throughout various agencies: $1.2 million annually
Across-the-board 2 percent reductions in grant programs: $80 million”
These are just a few of the cuts that will be made. There are many, many more. However, I want to play a little game entitled: You be the governor. Here’s how it works. Below is a snapshot of the operating appropriations for 2010. I want you to go through and decide where cuts should be made.
Now, there are some obvious areas that I believe most people would agree can not afford any additional cuts—education and public safety come to mind. Human services includes providing services to the disabled, mentally ill, poor (this encompasses public housing, SNAP benefits), WIC, benefits to children, homeless, and many others. The reason why this category is so high in Illinois is because the All Kids program offering health coverage to all uninsured children in the state is considered part of this budget even though there is a separate category for healthcare and family services.
Medicare and Medicaid, as well as child support enforcement are under the Healthcare and Family Services umbrella. Again, I think we would agree that these are important programs that are already stretched and need every dollar they can. To be fair, perhaps you think these are exactly the programs that should be cut, but then let me paint you a picture. Let’s say we retract the All Kids program to save funds. Now we are left with millions of uninsured children, many of whom desperately need health care. Not only will their parents go into severe debt from healthcare bills, causing a major strain on both families and the economy as a whole, but thousands of these children will actually die from lack of care.
Still want to cut healthcare?
How about benefits to the unemployed and poor? So I lose my job, and I don’t receive unemployment pay, SNAP or healthcare. Due to the struggling economy, I am not able to immediately find work. I have to choose between paying for rent or buying dinner, but eventually, I receive the eviction notice from my landlord. Where do I go? If I’m lucky, I have family to take me in. But many do not have this luxury. So they end up on the street or perhaps in an already crowded and strained homeless shelter.
So let’s move to Economic Development and Infrastructure. Alright–maybe we don’t fix bridges this year, or repair aging pipelines. Meh. We can just take our chances and hope we don’t end up with a Minneapolis-type infrastructure disaster. What about economic development? Seems to me that in a tough economic time, we probably need to invest in attracting businesses that will bring plentiful jobs to the state.
The Environment and Business Regulations includes the Dry Cleaner Environmental Response Trust Fund, Environmental Protection Agency, Human Rights Commission, Illinois Commerce Commission, and the Illinois Workers’ Compensation Commission. Now I think that you probably scoffed at the Dry Cleaner Environmental Response Trust Fund, but hold on a minute. Their purpose is to “assist Illinois drycleaner operators in the
cleanup of soil and groundwater contamination caused by dry cleaning solvents.” I don’t know if you’re aware, but dry cleaning is actually extremely harmful to the environment. The chemicals they use are highly toxic. I’m pretty sure I want them to keep keepin’ on as I don’t particularly want these chemicals in my water. And if you’re looking at this from a solely fiscal standpoint, they only get $5.3 million a year anyways, which in terms of the total budget, is basically nothing. The Human Rights Commission protects Illinoisans from unlawful discrimination, the EPA protects our environment, the Illinois Commerce Commission works mainly in energy and telecommunication–both of which we need. Aaaaand I think we all agree that the Workers’ Compensation Commission is necessary to protect us from our own workplace.
Believe it or not, the Government Services section encompasses the largest amount of departments and commissions (34 in all), but receives the smallest portion of the operating budget. (Check out page 343 of the budget to see the entire list.) Now at about 7.5%, that means they utilize approximately $1.7 billion, which definitely is a lot of money. HOWEVER, after taking into consideration that these funds are shared by 34 entities (1.7/34) that means if they all received the same amount (which they don’t), it would equal about $51 million for each. Now, just for the sake of argument, let’s say we determine that we can eliminate this entire budget item (which would be impossible for various reasons), we would only have freed up $1.7 billion of an $11.5 billion deficit. I’m no mathematician but something tells me it’s not going to be enough.
I am talking in generalities here because it would obviously take volumes of novels to go into the explicit detail needed, but the point I’m trying to make here is that we’re in trouble and while cuts and responsible spending are definitely needed, what’s also needed is a balanced budget that doesn’t risk our livelihood. At this point, the only way out is to increase income taxes.
Of states with flat rate income taxes (which I am aware is very regressive), we have the lowest income tax in the country. Just as a comparison, New York State has 7 tax brackets that range from 4 percent to 8.97 percent. Even at the lowest end they are higher than us. California has 6 brackets, ranging from 1.25 to 9.55 percent. While the low end is very low, hang on for a minute, because their exemptions are only $98 for filing single and $198 for married. In Illinois it is $2,000 and $4,000 respectively and if you recall, the Governor is actually looking to increase those amounts. Let’s look quickly at our neighbors, Indiana. They also have a flat tax rate, just slightly higher than ours at 3.4 percent. But, their exemptions are only $1,000 and $2,000. And it’s Indiana. Yuck.
I really hope that you made it to the end here and have learned a little something. I think it’s really important to have the entire picture before making a judgment, particularly when it comes to government. The media, politicians and interwebs can get things jumbled and before you know it, you’re watching a video of a monkey mouth raping a frog. Wait…what? If you have differing opinions, I’d love to hear them and then I’ll slap you…keeding.