A graduated tax rate is fair
I understand the ongoing frustration with the fiscal irresponsibility of governance at the state and local levels, but I’m troubled by the notion offered by some opponents of the progressive tax amendment that limiting revenue will produce desirable outcomes.
On tax fairness, it’s beyond dispute that taxing those with greater ability to pay is fair. That is the fundamental structure of the federal tax system, and the practice of most states that tax income mirrors this principle.
The competing issue is fiscal irresponsibility tied to new revenue, especially with respect, though not limited, to unfunded state employee pension liabilities. Illinois occupies a truly unenviable position in this regard, and faces frightening consequences on its current path. The future obligations that Illinois taxpayers are projected to face are sobering.
Our collective liability reflects current and future retirees, and the cumulative effect is crushing as time rolls by. But it’s the same story as compounding interest. Next year’s pension obligations will be a bit more than this year’s, the year after that a bit more than the preceding year’s, and so forth.
So in any given year, pension reductions would yield a small impact on current budgets. Budgets are made with short time frames, and pension reductions enjoy strong political support. Where reductions in current pension obligations yield relatively small short-run benefits and there are many other targets for budget cuts, it is naive to assume that incremental revenue shortfalls will force difficult structural change. I’d refer doubters on this point to David Stockman’s reflections on the tax cuts he engineered for Ronald Reagan.
Is it reasonable to expect that the state’s pension obligations will be reduced with constrained revenue? Perhaps, but state pensions have zealous guardians in place. Is it also reasonable to expect that the same pressure will lead to comparable, or larger, cuts in needed spending on education, health and other key state functions? The likely answer is yes. Those are costs that Illinois simply can’t afford to bear.
On balance, fairness issues win out for me. I will vote for the progressive tax. I also will at every opportunity look forways to put fiscal responsibility in general, and pensions in particular, on the legislative agenda.