My friend Mike O’Hare and my University of Chicago colleague (and fellow Princeton engineering alumnus) Todd Henderson are fighting over the expiration of the Bush tax cuts. I’ll let that exchange speak for itself, except for one comment. Whatever one thinks about the Bush tax cuts, professors like us should pay higher state income taxes here in Illinois.
I’ve written a few pieces lately on the precarious financing of state public employee health and pension funds. Thanks to inexcusably back-loaded collective bargaining agreements and accompanying budget shenanigans by Springfield politicians of both parties, Illinois now faces large unfunded liabilities that will drive our structural deficit long after the current economic crisis is resolved. Many states–Illinois included–continue to presume unrealistically high expected returns to avoid confronting the full magnitude of this problem.
Atypical but prominent corruption or sweetheart deals convince many voters that the problem here is caused by lavish and excessive pensions to public workers. In my view, some adjustment to current and future pensions is indeed warranted. Yet the real problem is not the pensions themselves but the failure to properly finance them or to raise adequate revenue to cover the state’s obligations.
Here’s where Professor Henderson and I come in. We should pay a few percentage points more in state income taxes to help fix this problem. For every dollar I pay in income taxes to the federal government, I pay about twelve cents to the state of Illinois. Our 3 percent income tax produces high burdens on low-income people in the form of other taxes. It also leads Illinois to rank 40th in the nation in the taxes we levy on the wealthiest 1% of citizens. And we just don’t raise enough money this way.
The results are predictable: poor services, and desperate budget measures that kick the financial can down the road to burden future constituents, taxpayers, public workers, and others. Illinois schools and other public services are not what they should be, either, when one considers the tremendous resources available across our state. These services won’t get better if nothing is done as additional bills come due.
This is where people like Professor Henderson and I come in. If people like us pay two or three percentage-points more in state income taxes, Illinois could raise several billion dollars in additional tax revenue every year. This would be enough to cover most or all of the unfunded liabilities in our public employee pension and health benefit systems. It would reduce our reliance on regressive and overly cyclical sales taxes. I wouldn’t be overjoyed to pay higher taxes. In these troubled economic times, people like us with secure six-figure incomes can certainly step up to do more.
If such taxes were enacted as part of a broader package to improve the state’s fiscal posture, it could have a huge impact in other ways. As affluent, tenured professors at one of the nation’s leading universities, we can afford to pay a little bit more. We also have much to gain from getting our state’s fiscal house in order.
I can’t say I am a disinterested observer. As a caregiver for an intellectually disabled man, I’m disgusted that Illinois ranks 51st in the nation in its ability to provide community-based housing and services to intellectually disabled people. I’m disgusted by the way families are treated when they–when we–need help. I’m disgusted by the long waiting lists for important services. We can do a hell of a lot better than this.
So Governor Quinn, raise my taxes already. It’s ok. Really.