Illinois is facing a constitutional amendment to change the way Illinois citizens are charged taxes. Historically, Illinois has had a flat tax system where everyone pays the same rate. This does not imply that everyone pays the same taxes. A 4% flat tax equates to $40,000 on earned income of $1 million, but only $2,000 on earned income of $50,000.
But Illinois is in bad fiscal condition right now, and our Governor thinks that a change to Illinois’s tax program is the ticket he needs to buy the state out of trouble. In this third installment opposing the State Constitutional edit, and today I challenge the argument on the basis of fairness.
The pro graduated tax lobby has a pretty easy job. Their message, intended to appeal to the solipsistic masses, is that if all the regular joes vote together to approve the constitutional edit there won’t be enough votes on the other side to counter it. In other words, stick it to them, or the state will stick it to you.
It is an age-old argument that the rich should be taxed because they can afford it. These sentiments are fueled by occasional stories of some wealthy douche-hat that gets caught cheating on his taxes or some group of politicians that creates a loophole in the tax law that allows rich constituents to avoid paying taxes on certain earnings.
But these anecdotes ignore the primary fact that most wealthy Americans already pay the lion’s share of all taxes without complaint. At the federal level, a proxy for graduated tax distribution, the top 1% pays 40% of all income tax. The top 10% pays 70%, and the bottom 90% pays 30%.
In flat-tax Illinois, the distribution for income tax is a little more balanced, with the top 15% contributing 60% of the tax revenue collected, but when we consider property and sales taxes, the percentage contributed by wealthy Illinoisans increases due to expensive homes, and higher expenditures on consumer goods. Under a graduated tax program, the biggest contributors would see their taxes nearly double.
At what point are the rich paying their fair share? Imagine in your own life, one particularly good year followed by checks written to the government worth $1,000,000 on April 15. That money is not going to your family’s stability, your children’s education, your grandchildren’s independence, or the charitable causes you support. You don’t get a thank you note from the government, or the citizens it supports. Instead, you hear the ongoing call, that you should be paying even more. And if you argue the contrary you will be badged as greedy and probably evil too.
Our wealthy Governor has stood up, a presumptive poster child for rich Illinoisans, and said that he feels he should pay higher tax rate. But let us be honest, as a member of the richest family in the state, his lifestyle and legacy would not be diminished at any tax rate. The challenges facing a guy that owns private jets are not the same as those faced by the fellow successful enough to fly business class occasionally.
The flat tax is fair. A graduated tax program could be fair and must be if it is successful. But we must reject that idea that just because someone has been successful is evidence – in itself – that they did not deserve to be. If Illinois cannot create a tax system that feels fair to those contributing the greatest amount already, those taxpayers will change their behavior, reducing their productivity and taxes paid before ultimately relocating to another state.