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CTU statement on federal tax bill

by ctu communications  |  12/20/2017

Gov. Bruce Rauner and his buddy-in-chief, President Donald Trump, both got a “win” today. Rauner wins because no one’s paying attention to his dangerous ideology of crisis creation to squeeze Illinois’ predominantly female public-sector workers, or his continued bungling as Illinois’ chief executive. And Trump wins by enriching himself, Rauner and their fellow billionaires at the same time services for the rest of us are slashed—all the while saying he did it for the middle class.

Deliberate policy decisions have transferred wealth from the bottom 90 percent to the top, with disproportionate impacts. People of color have seen higher rates of foreclosure, higher rates of unemployment and lower income. And the state’s rural and small cities have been impacted more than those in the Chicago area, especially through Rauner’s deep cuts to higher, public education and deep cuts to social services that hurt already-weak job markets.

Plus, the federal tax bill skews heavily toward Illinois’ richest residents, who can afford higher state taxes.

The real solution to Illinois’—and the country’s—signature challenge of wealth and income inequality is actually the complete opposite of what’s been attempted: Increase taxes on those at the top, and increase workers’ negotiating power through increased union membership.

Contrary to what Rauner, Trump and the like would have you believe, there is a way out for Illinois. Here are some suggestions:

  1. Close the carried interest loophole at the state level. The carried interest loophole allows private equity billionaires (like Rauner, who admitted skirting taxes this way) to fake their income by calling it capital gain, thus paying a lower tax rate than teachers, nurses, receptionists or construction workers. Trump supported closing the loophole at the federal level, and then flip-flopped (as expected). Closing this loophole at the state level could bring in between $500 million and $1.5 billion to Illinois at minimal net cost to the wealthy individuals who just got a tax cut at the federal level.

  2. Follow Minnesota’s lead and raise taxes on those earning the most. Minnesota’s billionaire governor, Mark Dayton, used a much different approach than Rauner. Rather than attempting to starve the state government, Dayton raised taxes on those most able to pay and led the state to a budget surplus that was then spent on the services Minnesota’s residents needed most—education, health care and infrastructure. And far from killing the state’s economy, Minnesota soared. Minnesota added more than 50,000 residents last year; Illinois lost more than 30,000. Minnesota’s unemployment rate is lower (3.3 percent to 4.9 percent for Illinois) and labor force participation rate higher (69.1 percent to 65.3 percent for Illinois, as of 2016). Public education in Minnesota is also funded more equitably.

  3. End the state’s new school voucher program. Not only does the program suck $75 million out of the state’s budget via tax breaks to wealthy Illinoisans, but the federal tax bill opens up 529 savings programs to K-12 private schools. This provision creates a double whammy for public education by diverting students and the state tax incentives tied to 529 plans. Rauner’s so-called “#2 accomplishment” is thus a scam that harms public education, the public service more people in Illinois use than any other. Scrap the voucher plan and shift the money toward Illinois’ new school funding formula.

Mayor Rahm Emanuel doesn’t get a pass on this, either. His attacks on public schools via his handpicked school board and his refusal to tax those who have money are unconscionable. He supported slashing special education and school budgets, leaving students without required services or counselors or librarians so long as he could maximize his TIF funds for downtown developers and giving his donor class a free pass on a corporate head tax that had been in place for decades. What he needs to do is reform the TIF program so that money goes to support sustainable community schools, reinstitute the corporate head tax to bring back mental health clinics and create a massive jobs program for youth of color. Those who would potentially be paying a corporate head tax just received a major federal corporate tax cut, so they can afford it.

Illinois has had a revenue problem for years, and the federal tax bill only makes that worse. The General Assembly should act to fix that flawed federal action and put the state on a course to harness its resources and unleash our state's real potential, and not the visions of sugarplums that Gov. Rauner dreams of.

Chicago Teachers Union