state budget – Chicago Newstips by Community Media Workshop http://www.newstips.org Chicago Community Stories Mon, 14 Jul 2014 17:31:05 +0000 en-US hourly 1 https://wordpress.org/?v=4.4.12 Corporate taxes and the state’s fiscal crisis http://www.newstips.org/2013/09/corporate-taxes-and-the-states-fiscal-crisis/ Thu, 26 Sep 2013 20:23:20 +0000 http://www.newstips.org/?p=7720 A coalition of community, labor and religious groups will hold a press conference at 9 a.m., on Friday, September 27 at the Thompson Center press room and march over to the Bilandic Building, 160 N. LaSalle, to a House Revenue Committee hearing on the Illinois Corporate Responsibility and Tax Disclosure Act.

 

Illinois is in fiscal free-fall, but our political leaders seem incapable of addressing a structural deficit created by our regressive tax system.

The state’s crisis threaten to swamp the budgets of cities and school districts as well as funding for human services and health care, but “the only solutions that are ever discussed are deeper and deeper cuts,” said Kristi Sanford of Northside POWER, part of a statewide coalition pushing for corporate tax accountability.  “But these cuts just hurt Illinois families and the state’s economy — and no amount of cuts can solve the problem.”

Meanwhile Springfield is leaving serious money on the table:  two-thirds of corporations operating in Illinois paid no state income tax in 2010, according to the Illinois Department of Revenue.

According to the Governor’s Office of Management and Budget, 80 percent of state revenues come from individual income tax and sales tax receipts; only 9 percent comes from corporate income taxes.

Corporations reporting billions in profits are estimated to have paid no state income tax.

We don’t know what individual corporations are paying, but major Illinois-based corporations — with massive profits — paid no federal income tax from 2008 to 2010 (in some cases receiving huge tax subsidies instead), according to Citizens for Tax Justice.

Who’s not paying?

And since state taxes track federal taxes, advocates say we can probably assume no Illinois income taxes were paid over those years by Boeing, with $14 billion in profits; Baxter International, with $1.3 billion in profits; Integrys Energy Group, with nearly $1.18 billion in profits; and Navistar International, with $1.1 billion in profits.

The problem is that for too long, corporations have entirely dominated tax policy debates, according to Dan Bucks, former director of revenue Montana, who advocates for corporate tax accountability measures.  He backs a measure now under consideration here to encourage greater public participation by requiring large publicly-traded corporations operating in Illinois to disclose their state income tax payments.

F”The citizens of Illinois ultimately own the tax system of the state,” said Bucks.  “They have a right to sufficient information to ensure that their tax system matches their values and is effective in achieving their goals.”

Fair Economy Illinois, a coalition of grassroots community organization from Chicago and downstate, is planning to pack Friday’s revenue committee hearing to demand passage of HB 3627.

Stalled in House

The State Senate passed a companion bill last year, but the House Revenue Committee voted it down.  Two Democrats on the panel, Rep. Frank Mautino (76th District) and Rep. Michael Zalewski (23rd District), helped defeat the measure.

Both are allies of House Speaker Michael Madigan, whom many hold responsible for Springfield’s inability to address the fiscal crisis in a balanced manner.

Sanford said a poll by Public Policy Polling showed nearly 80 percent of Illinois voters back legislation requiring publicly-traded corporations to disclose Illinois income tax payments.

Fair Economy Illinois also advocates closing several major corporate tax loopholes, including following the lead of other states by decoupling from the federal accelerated depreciation deduction, which would generate over $400 million a year. and eliminating a sales tax break for big box retailers, which could raise $115 million a year.

 

For more on those tax breaks, see last year’s Newstip, What corporate loopholes cost Illinois.

Also related:

In Springfield, no solutions

To fix state budget deficit, flip the tax burden

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Human services in the Age of Austerity http://www.newstips.org/2013/07/human-services-in-the-age-of-austerity/ Sun, 07 Jul 2013 20:05:10 +0000 http://www.newstips.org/?p=7557 Clients and welfare workers from the state’s human services system will discuss attacks on public services coming under the guise of austerity — including a privatization contract that an artbitrator recently ordered shut down — at a public meeting Monday.

The Alliance for Community Services is sponsoring the meeting on health care and human services at 6:30 p.m, Monday, July 8, at Teamster City, 300 S. Ashland.

Ralph Martire of the Center for Tax and Budget Accountability will discuss the state’s fiscal crisis.

“The reality is, we’re not broke,” said Fran Tobin of Northside Action For Justice, one of the initiators of the alliance.  “There’s lots of wealth in the state, but our regressive revenue system is failing to tap into it.”

Human service clients and welfare workers will tell stories of difficulties caused by a chronically understaffed system, said Steve Edwards, a retired union activist.

One source of problems is a new DHS pilot program — poised for expansion — that shifts from case-based to task-based organization of office work.  Under the program, caseworkers have been shifted to “teams” devoted to specific tasks.

“You have former caseworkers — who have college degrees in specific fields and a year of additional training — spending all day opening mail,” he said.  Everyone’s work goes into a single pile, with no one responsible for the ultimate disposition of particular cases.  It means clients no longer have a caseworker who they can call to address problems.

“They’ve blown up accountability,” Edwards said.  “It looks to me like sabotage.”

“Under the rhetoric of increasing efficiency, they’re clearly making things worse,” Tobin said.  “It’s insane.”

AFSCME Council 31, which represents state human service workers, has filed a grievance charging DHS with eroding job titles, said Edwards, a former AFSCME local president.

AFCME recently won an arbitration charging that a contract with a private firm to review Medicaid recipients’ eligibility violated contract language on contracting out.  An arbitrator ordered the state to cancel its contract with the consulting firm Maximus at the end of the year, according to the union.

Edwards estimated that for the cost of the $75 million contract, the state could have hired 1,500 additional caseworkers, increasing the workforce by something like 50 percent.

He said some caseworkers currently have caseloads of more than 2,000 individuals or families — far above the recommended caseload of 400 to 500.

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Alternatives to school cuts http://www.newstips.org/2013/06/alternatives-to-school-cuts/ http://www.newstips.org/2013/06/alternatives-to-school-cuts/#comments Wed, 19 Jun 2013 22:32:17 +0000 http://www.newstips.org/?p=7539 Just a month ago — when they were intent on closing 50 schools — the watchword at CPS was “quality education.”

“What we must do is ensure that the resources that some kids get, all kids get,” said Barbara Byrd-Bennett in an internet ad funded by the right-wing Walton Family Foundation.  “And these resources include libraries and access to technology and science labs and art classrooms….

“And with our consolidations we’re able to guarantee that our children will get what they need and what they deserve.”

That was then.

Raise Your Hand has released a very partial list of budget cuts faced by schools under the district’s new per-pupil funding system, and it’s impressive:

Goethe, Jamieson, Kozmisky, Sutherland, each will lose between $250,000 and $300,000.  Audobon, Belden, Gale, Grimes Fleming, and Ray, between $400,000 and $500,000.  Bell, Darwin Mitchell, Murphy, Suder, Sullivan High, betweeen $700,000 and $800,000.  Gage Park High, Lincoln Park High, Mather Elementary, Roosevelt High, $1 million or thereabouts.  Foreman High, $1.7 million.

CTU reports that Taft High School faces a $3 million cut.

According to Wendy Katten of RYH, every school they’ve contacted faces budget cuts.  So far they have figures from about 10 percent of CPS schools, and the cuts total about $45 million, she said.  (CTU budget analyst Kurt Hilgendorf said the union has requested district-wide figures on cuts but CPS has declined to supply them.)

“It’s horrific,” she said.  “There are terrible losses.”

It also clearly contravene’s Byrd-Bennett’s promise about what school consolidations would accomplish.

Losing library access

Two high schools,Von Steuben and Lincoln Park,  are reported to be considering laying off librarians — at Von Steuben it would mean no open-access library; at Lincoln Park, the library would remain open part of the school day but not after school — but many more principals are being forced to choose between staffing their libraries and having enough teachers.

At many schools it will mean  eliminating art or music.  At Katten’s son’s school, it looks like art will be eliminated and physical education will be staffed by a part-time teacher — which means gym just twice a week, far below the state requirement.

Funding for enrichment programming as part of the longer school day trumpeted by Emanuel last year is being eliminated.  At many schools, “the longer day is not going to be very enriching,” Katten said.

And many schools will be forced to lay off teachers and increase class sizes.  Audubon Elementary, losing $400,000, is considering laying off as many as six teachers, which will raise class sizes to 37 to 45, according to DNA Info.  Sullivan High is considering laying off seven teachers; Kelly High could lose ten or fifteen.

CPS’s per-pupil funding system, touted as a boon to principal autonomy, has turned out to be yet another way to remove resources from neighborhood schools.

It’s as if Emanuel thought he could cut his way to better schools.

TIF squads

And while the city’s elite clearly prefers budget cuts and layoffs to deal with CPS’s financial troubles, parents and teachers see another way.

Raise Your Hand is organizing “TIF squads” in every ward to compile the details of how schools are being affected.  They’ll use the information to impress individual aldermen with the necessity of declaring a TIF surplus and returning funds to CPS.

“We need a long-term sustainable solution at the state level, but parents refuse to accept these cuts now while the city is simultaneously handing out property tax money for projects like a $55-million DePaul stadium,” Katten said.

The group is holding an All South Side Schools meeting Thursday, June 20 at 7 p.m. at Augustana Lutheran Church, 5500 S. Woodlawn, to continue organizing.  Friday, June 21 at 10 a.m., they’re holding a parent rally against cuts at the State of Illinois buildling, Randolph and Clark.

In the next year they’re among many groups planning a serious drive to fix Illinois’s regressive tax structure — a desperately needed reform to address school funding as well as the state’s fiscal crisis.  Will Emanuel and the school board join in?

Where the money is

In her City Club address Tuesday, CTU president Karen Lewis outlined a series of revenue measures that would tap into the vast wealth generated by the financial sector and restore a measure of balance to the tax system — and financial stability to governing bodies.

“The CTU wants to work with our leaders in City Hall, Springfield and at the board to solve these sorts of problems,” she said. “We can’t work together on these issues because they keep creating new problems.”

Instead of sharply dividing the city with his campaign of school closings — which had virtually no impact on CPS’s fiscal problems — Emanuel could “take a holistic approach” and work with all stakeholders for basic changes that would really make a difference, Hilgendorf said.

One example:  CTU backed legislation in the spring session that would close three corporate tax loopholes that bring no economic benefit and cost the state $445 million a year.  It died in committee.

And while everyone’s attention and energy was absorbed by school closings, nothing got done on CPS’s pension crisis.

But at least we’re seeing progress on building a new stadium for DePaul.

***

At the Campaign for America’s Future, Richard Eskow promotes the new Education Declaration — which spells out what might be called real education reform — and provides an apt rundown of the modus operandus of “Michelle Rhee and Rahm Emanuel and the rest of their ilk, using the same playbook that’s been deployed against Social Security, Medicare and other vital government services. It goes like this:

1. Pretend that “budgets” are the real crisis – but never mention that corporations and the wealthy are paying less in taxes than ever before in modern history.

2. Make scapegoats of innocent people to draw attention away from yourselves. For Social Security they’ve attacked “greedy geezers,” but it’s hard to come up with a catchy equivalent for kids. (“Insatiable imps”? “Avaricious anklebiters”?) So they vilify teachers instead.

3. Sell a fantasy which says that the private sector can do more, with less money, than government can.  (Never, never mention that private insurance provides far less healthcare than public insurance, at much higher cost. And don’t bring up the mess privatization’s made of prisons and other government services.)

4. Find a name that doesn’t use words like “money-making.” How about “charter schools”?

5. Describe yourselves as “reformers” – rather than, say, “demolishers.” That’s why “entitlement reform” is used as a euphemism for cutting Social Security and Medicare. (Michelle Rhee even called her autobiography “Radical.” Apparently “Shameless” was taken.)

6. Employ the political and media elite’s fascination with (and poor understanding of) numbers. Suggest that “standardized” and “data-driven” programs will solve everything – without ever mentioning that the truly ideological decisions are made when you decide what it is you’re measuring.

7. Co-opt the elite media into supporting your artificial description of the problem, as well as your entirely self-serving solution.

8. Use your money to co-opt politicians from both parties so you can present your agenda as “bipartisan” – a word which means you can “buy” a few “partisans” from both sides.

“It shouldn’t be surprising that all these attacks share a common playbook. The money’s coming from the same pockets, and for the same reasons: so they can keep their own taxes low – and make money from the privatization schemes.”

 

Updated: A sentence with an inaccurate statement regarding the impact on selective enrollment schools was removed.

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Reality check: closing schools, saving money? http://www.newstips.org/2013/04/reality-check-closing-schools-saving-money/ http://www.newstips.org/2013/04/reality-check-closing-schools-saving-money/#comments Tue, 16 Apr 2013 18:34:48 +0000 http://www.newstips.org/?p=7137 For month after month, Chicagoans have been told that CPS has to close schools because it has a $1 billion deficit.

How will people react after the massive disruption of wholesale school closings, when the district’s financial problems remain unchanged?

And that’s before Mayor Emanuel starts handing out new contracts to charter schools.

CPS says they’ll save something like a billion dollars over the next decade by closing 54 schools.  There’s reason to be skeptical.

According to the district, they’ll be saving $43 million a year in operating costs and an average of $56 million yearly in capital costs by closing the schools.  The operating savings come from laying off administrators and staff, according to the Sun-Times, which called it a conservative estimate, since it doesn’t include teachers who will lose their jobs.

Debt service

But that was before Catalyst and WBEZ revealed that the savings from school closings calculated by CPS did not take into account debt service for a new bond issue covering spending related to school closings.

CPS is planning to spend $233 million in upfront operating and capital costs for receiving schools, including building upgrades, air conditioning, security, iPads and learning gardens — “investments” to make closings more palatable, and a token gesture toward longstanding complaints that neighborhood schools are under-resourced.

About two-thirds of a new $329 million bond revenue will go to cover those costs, according to Catalyst; debt service will be $25 million a year for 30 years.

The $43 million in operating savings will more than cover debt service costs, CPS tells Catalyst.  But it doesn’t leave very much in the way of savings.

It’s worth noting the recent study that found that districts across the country consistently overestimated savings and underestimated the costs of closings.  CPS’s budget forecasting record does not make it a likely candidate to be an exception.  (Neither does Mayor Emanuel’s.)

Where CPS is clearly — perhaps intentionally — overestimating savings is in its claim of $560 million in avoided capital costs over the next ten years.

Capital savings?

A funny thing happened on the way to CPS’s 2012 capital needs assessments:  the district added a huge wish list for each school.

Previous assessments dealt with basic structural needs.  The new assessments include air conditioning, new or upgraded science and computer labs and art rooms for each school — without regard to actual space availability in individual schools — playground construction or repairs where needed, and building accessibility.

(This doesn’t mean CPS has altered its policy and is making AC and libraries standard features at neighborhood schools, however.  The only place AC or libraries are being added are in receiving schools that currently lack them.)

The capital needs assessments shot up — and so did the projected savings from closing schools.  People noticed.

Blocks Together noted that for ten West Humboldt Park elementary schools — five of which are now slated for closing — capital needs assessments doubled and in some cases more than tripled.  What that means is that CPS can claim more “savings” from school closings.

The East Village Association noted that the capital needs assessment for Otis Elementary went up from $5.7 million in 2010 to $11.9 million in 2012; for Peabody, which CPS wants to close into Otis, they went up from $3.3 million in 2010 to $11.5 million in 2012.

Even Emanuel’s City Council leader, Alderman Patrick O’Connor (40th), noticed.  As DNAinfo reports, O’Connor “said the $16.3 million CPS said is needed to update and maintain [Trumbull Elementary] is ‘significantly higher than you would actually spend if in fact you were going to keep that school open.'”

“‘Clearly if you wanted to make it top-of-the-line, $16 million would be a nice investment,” O’Connor said. “But if you just wish to maintain the building to keep it open, you’re more in the area of [$4 million to $5 million].”

So a half-billion in savings from capital spending — in a district that has traditionally spent little on neighborhood school buildings and lavished spending on selective enrollment and charter schools?  Don’t believe the hype.

Real money

In any case, if you want to talk about the school district’s financial distress, school closings won’t have much impact.

The $43 million in operating savings CPS claims amounts to 1 percent of the district’s operating budget — and that’s before subtracting debt service costs.  The whole framing of the issue in terms of the scary big deficit seems to have been pure misdirection.

Much more significant factors include debt service — rising by $100 million this year to $475 million in annual costs — and a loss of about $100 million in state aid since 2011, expected to drop to $140 million.

And pension costs. With a previous deferral of pension obligations coming due, CPS’s annual pension payments, which are $200 million this year, are set to shoot up to $600 million next year.

Now we’re talking real money.

How this will be addressed is anyone’s guess at this point.  Springfield could work out another postponement of CPS’s pension obligations.  Or there are various state and local revenue sources that could be tapped, if the political will is there, according to Kurt Hilgendorf of CTU.

Current negotiations over pension “reform” in Springfield have focused on plans that include cutting benefits, an approach that will certainly bring a drawn-out court challenge, since the state’s constitution explicitly prohibits cutting benefits.

A responsible approach would involve negotiating with unions — whose members certainly want to see their pension funds remain solvent (indeed, unions seem willing to consider higher employee contributions) — and coming up with new revenue.

All of these problems — the deficits, the pension crises, everything — flow from the state’s disfunctional revenue system, an upside-down, regressive tax structure which fails to capture revenue at the top, where it’s growing, and instead aims squarely at the middle and bottom, where people are steadily losing ground.

For some reason, all the billionaire reformers and all their politician friends prefer ordering cuts to fixing the state’s revenue system.  Some argue, not without plausibility, that they welcome fiscal crisis as an excuse to push privatization.

So when Mayor Emanuel asks what alternatives his opponents have, or Barbara Byrd-Bennett asks where they were ten years ago, it’s more than insulting, it’s ignorant.

Because for well over a decade — back when Byrd-Bennett was closing schools in Cleveland and Emanuel was raking in his own millions as an investment banker — the activists and organizations now opposing school closings have been pushing for progressive tax reform and real TIF reform.

But instead of rallying people to begin talking about a realistic solution, one that goes to the roots of these problems — instead of even attempting to move beyond talking points to a grown-up conversation over budget problems or the pension crisis — Emanuel has chosen a path that has produced sharp division and conflict.  And it doesn’t begin to address the district’s serious financial problems.

 

Related:

What could go wrong?

Better schools?

 

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Common sense on pension reform http://www.newstips.org/2013/01/common-sense-on-pension-reform/ http://www.newstips.org/2013/01/common-sense-on-pension-reform/#comments Thu, 10 Jan 2013 00:11:56 +0000 http://www.newstips.org/?p=6865 Lots of gnashing of teeth over the failure of the legislature to “do something” about pension reform.

Some sensible sorts point out we’re probably better off without the plan put forward in the House, which would have been challenged in court and almost certainly found unconstitutional, since the vast bulk of its savings came from reducing the benefits of current state workers and retirees.

In Arizona, which has a constitutional provision like Illinois’s barring any diminishment of pension benefits, a recent reform plan was found unconstitutional – and the state was ordered to pay workers back with interest, points out Ralph Martire of the Center for Tax and Budget Accountability.

If there’s one thing we’ve seen this week it’s the wisdom of the 1970 Constitutional Convention in protecting state workers from lying, thieving politicians — and from honest, well-intentioned ones who try to fix their messes without seeing the big picture.

All the plans on the table are focusing on the wrong area of the problem, Martire says.  “We don’t have a benefits crisis, we have a debt crisis.” It’s the predictable result of the 1995 “reform,” which pushed the problem down the road by steeply backloading pension fund payments.

Stabilize the debt

CTBA has proposed amortizing the pension debt over 45 years, which would head off steep pension contribution increases now facing the state — and in fact reduce pension costs over time.

With 45-year amortization, the $8 billion annual pension contribution and debt service would be stabilized and would gradually but steadily come down, approaching $6 billion by 2045.  That’s a lot of money, but it’s a lot less than $16 billion each year projected 30 years down under the current scenario.

Even under Governor Quinn’s pension stabilization plan, which depends on courts validating a choice for retirees between full health coverage and promised cost-of-living increases, state contributions rise steeply after the next few years to unaffordable levels – somewhere between $10 billion and $12.5 billion a year by 2040, according to CTBA.

By getting the state off the escalator, amortization is a sensible first step toward dealing with the crisis, and Martire expects legislation to accomplish that in the coming session.

Another sensible step would be sitting down with the unions that represent the workers who are affected by this crisis.

Talk to unions

State workers want a sustainable solution as much as anyone, and they’ve gone so far as to propose increasing employee contributions if the state will close corporate tax loopholes (including several where Illinois leads the nation in giveaways) and provide a legal guarantee that state contributions will be made.

They point out that at the Illinois Municipal Retirement Fund, which is legally required to make its pension contributions, no funding problem exists – yet none of the proposals now on the table include such a guarantee.

[CORRECTION: The House bill would require annual contributions, but unions say its enforcement provisions are limited and inadequate.]

But Springfield has been “stonewalling on participation of unions,” said John Murphy, president of the University Professionals of Illinois retirees chapter.

The coalition of state workers unions has renewed its call for a pension summit with lawmakers.

“The lame-duck session made it clear once again: Legally dubious proposals developed without working with those most directly affected — public employees and retirees — are a recipe for failure,” said the We Are One Illinois coalition in a statement.

Fairness

There’s also the common-sense notion of fairness:  state workers and retirees haven’t caused the crisis – they’ve made their payments with every paycheck – and they aren’t living high on the hog, especially the large majority who aren’t eligible for Social Security.

Finally, common sense would dictate that Illinois has to address its fundamental fiscal problem – a revenue system that looks for money in all the wrong places.

The regressive tax structure – with low-income residents paying twice as much of their income to state and local taxes as the wealthiest do – leaves untouched the sector that’s reaped the most economic gains in recent decades.  And of course, as Quinn has pointed out, half of Illinois corporations pay no income tax.

CTBA and the League of Women Voters are working on a constitutional amendment allowing a progressive income tax – which would reduce most taxpayer’s rates — for voter consideration in 2014.

It’s one of a number of serious efforts to address the state’s revenue crisis.  There will be no real solution to these problems without taking this on.

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In Springfield, no solutions http://www.newstips.org/2012/06/in-springfield-no-solutions/ http://www.newstips.org/2012/06/in-springfield-no-solutions/#comments Sun, 03 Jun 2012 20:26:24 +0000 http://www.newstips.org/?p=6321 Sad to say, nothing they’re doing or talking about in the General Assembly will have a significant impact on the state’s chronic budget crisis.

Not draconian Medicaid cuts, not possible pension cuts or casino expansions.  The legislature is barking up the wrong trees, and doing it over and over.

That’s because the state doesn’t have a spending problem.  In real terms, Illinois has been steadily cutting spending on education, human services, health care, and public safety for the past decade.  Medicaid is not the problem: general revenue funds going to Medicaid are down over the past five years.

According to Ron Baiman of the Center for Tax and Budget Accountability, Illinois is one of the nation’s wealthier states, looking at the state’s gross domestic product per capita.  But it has been one of the nation’s lowest-spending states, looking at state spending as a percentage of GDP.

So the problem isn’t overspending, and cutting doesn’t get us closer to a solution. The problem is a regressive tax system that doesn’t tax where the money is.

Regressive

Illinois has one of the most regressive tax structures in the nation.  As noted here last year, the bottom 20 percent of households pays twice as much of their income in state and local taxes as the top 20 percent does.

Even the flat income tax is regressive, since it imports all the federal tax code’s loopholes; of the current nominal rate of 5 percent, households earning over $1 million a year pay an effective tax rate of just 2.1 percent – the same as households earning over $10,000.  The squeeze is on the middle.

And especially with the surge of income inequality in recent decades, that means the state asks more and more from people who are doing less and less well, and fails to capture the gains of economic growth, which are increasingly found at the top.

It can’t go on forever.  At some point Illinois leaders are going to realize there’s no alternative to a progressive income tax.  The constitution, which mandates a flat tax, will have to be amended.

All our neighboring states have progressive systems – and that’s the reason their budget problems are so much less than ours.  If we took Iowa’s income tax rates and applied them to Illinois’s tax base, we’d raise $6 billion more a year – and 54 percent of taxpayers would get a tax cut averaging 24 percent, according to CTBA.  If we took Wisconsin’s we’d raise $3.6 billion more a year and cut taxes for more than half our residents.

Tax cut

The Illinois constitutional amendment will have a straightforward appeal: nearly all taxpayers’ rates will go down.

CTBA has fashioned a proposal for a progressive tax system for Illinois that raises an additional $2.4 billion yearly (even after allowing for increased tax avoidance by wealthy taxpayers) and reduces the tax rate for 94 percent of taxpayers.

Everyone earning under $150,000 would get a tax cut.  Starting to sound good?

It’s not even very tough on the wealthy; CTBA figures the effective tax rate (after deductions, credits and offsets) would top out at 6.3 percent for those earning over a half million a year.

There’s other money the legislature is leaving on the table, as it cuts public services to the bone.  A restructuring of the corporate income tax in 2001 – an unsuccessful attempt to encourage job growth — means most Illinois corporations pay no income taxes.

And an antiquated sales tax which applies to goods but not services – so if you buy a lawnmower and gas to mow your own lawn, you pay a sales tax, but if you hire a lawn service you don’t – costs the state between $500 million and $1 billion a year.

Corporate welfare

Then there’s corporate welfare – an area in which Illinois is a leader.  The Responsible Budget Coalition identified six corporate tax loopholes which don’t make economic sense — and where Illinois departs from federal policies and practices in other states — costing Illinois nearly $700 million a year.

These include a deduction for dividends paid by foreign corporations to parent corporations here ($386 million a year) and a domestic production credit, which reduces corporate tax bills here for production in other states ($200 million).

Then there’s a $75 million tax break for oil companies because, unlike the federal government, Illinois defines the outer continental shelf as outside the national boundaries.

On top of RBC’s proposals, CTBA and others have highlighted the accelerated depreciation allowance, a federal provision that other states have decoupled from.  It costs over Illinois $300 million a year (more here).

Altogether that’s well over a billion dollars, maybe two billion, maybe more, that the  General Assembly has left untouched, apparently preferring to throw sick children out into the street.

“Everybody’s talking about how this was such a hard, courageous vote,” said Lynda DeLaforgue of Citizen Action Illinois after the $1.6 billion Medicaid cut was passed.  “Wouldn’t it have been more courageous if they had taken on the oil companies?”

Medicaid

That $1.6 billion isn’t the final figure, since kids from 26,000 families thrown off Family Care – and thousands of individuals to be thrown off Medicaid — will cost more when they end up in emergency rooms.

And the $17 million cut from home health care will cost the state more when people with disabilities are forced into nursing homes.

“You’re going to end up spending any money you save,” said Gary Arnold of Access Living.  “It’s very shortsighted.”

The elimination of Illinois Cares RX drops prescription coverage for 160,000 low-income seniors and people with disabilities. “This sudden and extreme elimination of benefits for a very vulnerable population will most surely put peoples’ lives and health at risk,” according to Citizen Action Illinois.

The group is among several asking Governor Quinn to restore the funding – or at least to postpone elimination of the program, now set for July 1, until next January to allow providers to help identify options and potentially save lives.

Pensions

There was no pension deal, to the chagrin of many mainstream commentators.  Here, too, there are legal obstacles.  The deal under consideration – which would require public workers who’ve paid for their pensions to bear the burden of politicians’ profligacy — would seem on its face to violate constitutional protections of state employees’ pension rights.

Quinn wants to push on, but the matter is more likely to be addressed in the veto session, after the November election.

Through extensive grassroots pressure, public workers succeeded in countering some of the biggest myths around the pension crisis, said Anders Lindall of AFSCME Council 31.  Chief among these is the notion that exorbitant public employee pensions are driving the budget crisis.

In fact most public workers’ pensions are modest – they average $32,000 a year, and 80 percent of state workers don’t get Social Security.  That’s after contributing 8 to 10 percent of each paycheck to their pension.

“You don’t hear anything about ‘gold-plated pensions’ anymore,” said Lindall.  “More and more people understand it was the politicians who caused the problem.”  They caused it by using pension funds as a credit card to paper over an inadequate revenue system, he said.

It turns out the revenue crisis — the regressive tax system — is driving the pension shortfall.

Public worker unions in the We Are One Illinois coalition have worked with legislators, offering ideas toward a solution “that’s fair to workers who have paid their share and puts the retirement system on a strong footing in a sustainable way,” said Lindall.

Public workers “recognize the scale of the shortfall and are willing to be part of a solution,” he said.  “No one has a greater stake in securing the future of the retirement system.”

One of their demands is “an ironclad guarantee that pension fund contributions can’t be skipped or shorted,” he said.

Governor Quinn said he’ll meet with legislative leaders to keep pressing for a resolution.  Public workers unions hope they’ll be included in the process, Lindall said.

That might save on lawyers’ bills down the road.

Casinos

The GA passed a casino expansion bill, but it contains features (including slots at racetracks and gaps in oversight) that led Governor Quinn to veto a similar bill a year ago.  It could end up part of the horse-trading in the fall veto session.

If it does come to pass, expect the benefits in terms of jobs and public revenues to fall short of what’s being promised now, said Doug Dobmeyer of the Task Force to Oppose Gambling in Chicago.  “Proponents always lie about the benefits,” he said.

What we do know is that gambling takes money out of the consumer economy.  A Chicago casino with 4,000 slot machines, each taking in $100,000 a year, would remove $400 million from the consumer economy, U. of I. Professor John W. Kindt explained last year (see Slot Machines Kill Jobs for more).  That’s a heavy blow to a struggling economy – and a lot of lost sales tax revenue.

And the money the state takes in comes, by and large, from moderate-income people.  Like the new cigarette tax, like the speed cameras and higher water bills, it’s just one more grab for revenue from people who are struggling, by politicians who can’t see past the next election.

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What corporate tax loopholes cost Illinois http://www.newstips.org/2012/02/what-corporate-tax-loopholes-cost-illinois/ http://www.newstips.org/2012/02/what-corporate-tax-loopholes-cost-illinois/#comments Tue, 21 Feb 2012 23:18:41 +0000 http://www.newstips.org/?p=5690 With Governor Quinn set to call for major Medicaid cuts Wednesday, a new report says Illinois is losing hundreds of millions of dollars a year through corporate tax loopholes that other states have closed.

Indeed, Illinois leads the nation in revenue lost through several of the tax breaks, according to a report from Good Jobs First and Make Wall Street Pay Illinois.

The biggest loophole is the accelerated depreciation deduction, which costs the state more than $1 billion over three years – far more than any other state, according to the report.

The Illinois deduction is based on a tax break granted by the federal government, designed to encourage capital investment by allowing companies to write off new equipment immediately rather than over its expected lifespan.  Most states have “decoupled” from the federal measure.

“Forgoing revenue in the short term to help stimulate the economy is possible for the federal government because it is allowed to run a deficit,” according to the report.  “But for the states, with their balanced-budget requirements, such revenue loss during a recession would only force deeper budget cuts.”

Small businesses are covered by a separate deduction and wouldn’t be affected by decoupling, the groups say.  Decoupling from the accelerated depreciation deduction has been advocated by the Center for Tax and Budget Accountability (see Newstips from 2008 and 2011).

A break for Wal-Mart

Illinois could bring in $115 million a year by eliminating the sales tax “vendor discount,” a relic of the pre-computer age that gives retailers a portion of sales tax revenues to cover handling costs.  The groups estimate that Wal-Mart took in nearly $10 million from sales taxes paid by Illinois shoppers last year.

The state loses at least $63 million a year by using the single sales factor, which eliminates corporations’ taxable property and payroll share as factors in figuring income tax bills, instead using only their in-state sales.  Large manufacturers lobbied for the loophole, arguing it would create manufacturing jobs.  It hasn’t.

The formula can reduce the tax rate of Illinois-based corporations with significant production, payrolls, and property holdings here  but mostly out-of-state sales by 80 or 90 percent.

“We expect that the governor and general assembly will adopt a budget that protects revenue sources and provides for the educational, health care and infrastructure needs of the people of Illinois,” said Rev. Maggie Pagan-Banks of A Just Harvest, part of Make Wall Street Pay. “While the state is struggling to meet critical obligations to its citizens, it cannot afford to simultaneously subsidize corporate profits.”

At Clawback,Greg LeRoy of Good Jobs First, the report’s co-author, highlights recent layoffs at Sears’ Hoffman Estate headquarters – announced weeks after a $275 million property and income tax break designed to keep Sears here – calling it “the latest evidence that unaccountable tax breaks fail to promote investment for job creation.”

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CME tax break is ‘occupied’ http://www.newstips.org/2011/11/cme-tax-break-is-occupied/ Thu, 10 Nov 2011 20:48:55 +0000 http://www.newstips.org/?p=4927 About the time CME representatives were meeting with legislators in the state capitol yesterday, a huge group of people filed into the building’s rotunda and began a “people’s mike.”

The first mike leader began: “We are Occupy Springfield,” and the crowd repeated each statement he made, amplifying it through people power.  “We are the 99 percent.  We will be heard.  Vote no on SB 397.”  That’s the bill granting CME a break on the state income tax worth $60 million or more (see previous post).

As the first leader was escorted out by Capitol police, another was tagged and continued the statement, a process that continued until the police apparently decided to just let them finish.

“Lawmakers in Springfield should be fighting tax breaks for greedy corporations, not breaking promises made to working families,” they said, phrase by phrase.

“Lawmakers are threatening to drain money from the pensions of firefighters, police, teachers, of veterans and the elderly, of minorities and the disabled; they’re about to give away/ more money to the 1 percent – to the Mercantile Exchange, to the Board of Trade, to the Options Exchange – even though they represent the industry responsible for the economic meltdown.”  You can get the whole statement in the video below.

Legislators have reportedly decided to postpone a vote on the measure.

“We think it might have helped push it back a little bit, to have a big group of concerned citizens come in the Capitol building and make a huge deal about it in such an unorthodox fashion,” said Benny Ha Ha, one of Occupy Springfield’s contacts.

“CME is a very big corporation, and they’re very threatening toward our politicians,” he said.  “If they can’t buy them off they’re going to threaten to leave the state.”

Occupy Springfield has held a daily vigil at the Old State Capitol Plaza and last month delivered an eviction notice to lobbyists after a rally that drew hundreds.

The group’s participants are mainly from Springfield, with some coming from outlying areas, Ha Ha said.  As the video shows, they range from young to old, including students, workers and retirees.

The group is now planning a series of potlucks to reach out to people in different areas of the city, Ha Ha said, and they will publicize Black Friday, the big shopping day after Thanksgiving.

“It’s a big deal to us to buy local and pay with cash,” he said.  “We need to make sure local people are built up.”

And they’re planning to “push the envelope” when the legislature considers the CME tax break later in the month.

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