Tuesday, January 17, 2006

A Taxing Question


For a while now, Mike Lawrence, of SIU's Paul Simon Public Poicy Institute, has probably been my favorite Illinois political commentator. He manages to deftly combine keen political insight with practical real world application and analysis. Today's column in the State Journal-Register is no exception.

In it, Mike addresses the state of our economy and education system, and their ramifications for our long-term prognosis. For those of you too lazy to follow the link to the article, here is the second half of it:
Given our changing demographics, we should address squarely the related academic and employment achievement gaps between whites and minorities. We should enlist and empower religious and other community stalwarts to aid in the family intervention that will help disadvantaged children gain the education so vital to them and to our state.

We simply cannot field a skilled work force that will entice high-paying enterprises to locate and expand here without sufficiently funding public schools and providing an affordable array of specialized training, community college and higher education programs.

Money is not the only answer. But Illinois has a deficit in the billions and a revenue structure that can no longer fund vital needs.

We already have burdened tomorrow’s taxpayers with too much debt. As our economy continues to change, how can we justify imposing a sales tax on goods but not services when it could generate $1 billion even if health care were exempted? How can we blithely remain one of the few states in the nation not to tax the retirement annuities of its most affluent citizens when even limiting the levy to those making $75,000 or more would reap hundreds of millions of dollars?

Confronting those issues could put politicians at risk. But failure to do so leaves children and jobs at risk. Where are the eagles in Illinois public service who will take wing while flightless ostriches ignore reality, pander to our self-interest and cheat our kids, grandkids and the state they claim to love?

We've had, and are having, some spirited discussion on education funding on recent threads here, so let's try a different angle today. How do you feel about a revision of the state's sales tax structure to include certain services?

For point of reference as to some of the inequities in the present system, I will leave you with one of my favorite examples. In our state, the homeowner who buys a lawn mower to tend to his grass pays a sales tax on that purchase. But the wealthy individual who hires a landscaping company to take care of his property pays no sales tax for such service. There are myriad other examples along these lines, where there exist differences without clear supporting rationale for the same.

Is this inherently unfair, regressive, or is there a justification for keeping our system the way it is? Have at it. And obviously, feel free to address anything else raised by Mr. Lawrence in his article.

17 Comments:

At January 17, 2006 at 10:06 AM, Anonymous Southern Illinois Democrat said...

There he goes again.

MIke Lawrence knows of only one cure for all ills, raise taxes on the working men and women of our state.

Mr. Lawrence advised Edgar to implement the largest income tax increase in history on the citizens of our state, not to mention fee increases including huge increases in the hunting and fishing license.

Mr. Lawrence is one of the most partisan political hacks that ever came down the pike.

Many of us who live in Southern Illinois still remember the role he played in the Ryan campaign when Ryan ran against Poshard.

 
At January 17, 2006 at 10:14 AM, Anonymous Anonymous said...

I don't get it, are you saying that he's a tax and spend Republican?

 
At January 17, 2006 at 10:15 AM, Anonymous Truthful James said...

John --

It is not the money. More funding (already up 157% in 15 years) does nothing to correct the imbalance between Education cost and Education Value. Much of the money from the State and at referendum has gone to increase administrator and teacher salaries. Subject matter mastery takes a back seat to working towards advanced education degrees.

Intra system public school choice is a baby step towards full choice.

The ISBE is a bad joke. Until last year, Illinois graduation requirements ranked 49th in the nation. The testing system is being dumbeed down as we speak. This comes affter a period of years during which the tests validated the classroom instead of the subject matter. One would not expect more, given the background of ISBE employees.

Within the schools the ratio of Education degrees to subject matter degrees is a similar disgrace. Subject matter mastery is necessary.

In measurement of international standards our schools are at the bottom. We refuse to let No Child Left Behind testing in our doors because of the local embarrassment it would cause. Comparisons with Western European schools plus those of Japan, South Korea, the PRC, Taiwan, and India show deteriorating performance through the school years cuminating in our advanced classes in high school physics and science being ranked at the absoilute bottom.

We have got to compete in a 21st century world marketplace. We do not. No wonder knowledge jobs go overseas.

The present system holds the parents, the students and the country in thrall. It is over expensive and underproductive. The unions themselves resemble the industrial unions of the seventies as the car manufacturers struggles to complete with the new wave of quality imports.

Solutions: let education funding be portable with the students; remove the closed shop and let more knowledge master teachers into the system; eliminate school personnel strikes; revanmp the ISBE and restore absolute standard testing; stop treating education as a political function, with rewards for votes.

It is an economic function affecting the health of the state and the nation.

 
At January 17, 2006 at 11:25 AM, Blogger Hon. John Fritchey said...

TJ,

I appreciate the comments, and as I said, there are a couple good education threads going right now. I guess my question is, putting the education issue aside, does it make sense to revamp our sales tax system?

 
At January 17, 2006 at 12:26 PM, Blogger Bill said...

John,
Sales tax on services is just one of the many ways at the state's disposal to enhance revenue.
The governor proposed a tax on software.
How about a tax on internet sales?
The easiest, but most regressive, is a simple increase in the state income tax rate to 5-7% with deductions or credits for the lowest paid workers. It is about time that the most affluent of our state pay more to preserve and improve the excellent services that we in Illinois enjoy.
Why should citizens who don't hunt or fish, and may even find it morally offensive, have to pay taxes to support these activities. Let them pay the true cost of these facilities.
The selfishness of the people who have the most never ceases to amaze me.
Of course, all of this talk about increasing revenue is irrelavent in an election year and probably beyond.

 
At January 17, 2006 at 2:08 PM, Anonymous Anonymous said...

We are right back to square one, AGAIN. Raising money. I don't want to hear that we have "cut to the bone", and still have no money. I don't believe we have cut enough. Raising the State Income Tax is regressive. What happened to SB2080, implementing sales tax on internet purchases? That's free money just laying around. Plug that loophole before you come begging the over burdened taxpayer again.
Maybe we need to be made more aware of the "member initiatives" before that money is doled out.
Cut the fat, and stop looking for ways to generate money, before you come to the taxpayer.

The pension problem has been looming for years. Why does it take so long before somebody in Springfield finally sees the light, and does something about it? Isn't it your job as State Rep. to fix problems? Well this is a big problem that needs fixing.

 
At January 17, 2006 at 2:12 PM, Blogger Making The Wheels Turn said...

Taxes on services just opens up a brand new pits of snakes to deal with.

If you look at other venues which have tried this (and if they are being honest about it), they'll tell you that almost from the bell being rung, it's everybody out to get a special deal for themselves (like we need MORE LOBBYING going on here in Illinois!).

I deal extensively with computer software, and I'm talking specific application software where a lot of add-on services get provided. We're a small private shop, but we make good money, & we spend to take care of our people, because if we don't, we've got no business.

Now, I'm not big on paying a 2% services tax, because nobody likes more taxes, particularly because we (at least) don't see anything even remotely worthwhile coming out of the extra money. Hate to tell you, but there's absolutely ZERO credibility on added taxes within State government.

But, the bigger issue for us is that not only do you want higher taxes, but then you (the generic version of "you") seem to take extra pride in making our lives as miserable as possible with added paperwork and more rules.

Bottom line - If you can't do it smart and simple, don't do it at all.

And since there's more than ample proof out there that say's you can't - don't do it.

Ex. See the utter nonsense passed last year(?) by the IL legislature on the 7% assessment cap currently only used in Cook County. I still don't think there's more than a dozen people statewide who even have a clue as to all the crap stuff into that bloated, larded up excuse for legislation.

 
At January 17, 2006 at 6:15 PM, Blogger JB Powers said...

The solution to irresponsible govenment spending? More taxes!

Internet sales are already taxed, as you all know, when the sale is within Illinois. A sales tax on internet purchases out of state is, of course, unconstitutional.

Until someone in state government has the nerve to face the utter waste of "Early Retirement" programs, I see no reason that taxpayers should spend another dime on this mess.

JBP

 
At January 18, 2006 at 6:28 AM, Anonymous Anonymous said...

If the taxpayers give you more money today, the government will be back in five years asking for more. The government is addicted to spending.

What does Shopaholics Anonymous suggest? Cut up the credit cards.

There is absolutely *no* circumstances where I will support increasing state spending. Because if I do, you will be back in a few years wanting more.

Lottery->riverboat casinos->land casinos->keno

no income tax->3% income tax->graduated income tax

Tolls: always increasing
Vehicle sticker fees: always increasing
Cigarette tax: always increasing
Property tax: always increasing
Gas tax: always increasing

It will never end. So I am drawing the line. No more.

 
At January 18, 2006 at 11:39 AM, Anonymous lake county lancer said...

First, a suggestion: since lottery income tends to be regressive (poor people play more than rich people), why not keep lottery ticket sale money in the local districts where the tickets are purchased, downtown Chicago exempted. This would encourage people to buy tickets (and presumably shop) in their neighborhoods and take away some of the regressive nature of the lottery revenues.

My favorite education funding example: North Chicago's school district asks for more money. They're denied. They then move to disband the entire district -- the administrators would lose their jobs, but the kids, mostly minority, would be fanned out to the surrounding mostly white districts. Va-wa! They get more funding.

The point of Rep. Fritchey and the above example, I think, is that the "tax revamp" question is just a twist on the more fundamental question of whether we favor progressive, flat, or regressive taxes. Currently education funding is a hybrid -- property taxes are roughly progressive, but gambling revenue is definitely regressive. If you want progressive taxing, you don't use the sales tax (regressive -- poor people would pay a greater portion of their income), but income tax.

 
At January 18, 2006 at 6:47 PM, Blogger JB Powers said...

It is disturbing that 9/10 postings on political blogs want to control spending by the government, and 9/10 articles in print in the Tribune, Sun-Times, State Journal Register demand more wasteful spending.

JBP

 
At January 19, 2006 at 7:23 AM, Anonymous Cassandra said...

I agree with southern illinois dem with the exception that I know nothing about Mr. Lawrence and can't comment on his objectivity or
competence.

Mr. Lawrence says absolutely nothing about the jobs farm that Illinois state government has become, a state of affairs that will be worsened if state managers gain union protection, which is apparently being considered.

There are far too many state managers, both political and non-political. While many may be doing some kid of work to while away their days, much of that work is make-work rather than work that really needs to be done. And remember, a state employee who makes, say, $60,000 is probably costing us at least $100.000 because of the lush health and pension benefits.

A good example is DCFS, an agency
whose caseload has dropped dramatically since the mid-90's, from about 50,000 kids in care
to around 17,500. But there has been an increase in management staffing under Blago, mostly political hires. In addition,
much work has been contracted out...apparently, the DCFS managers and caseworkers are so inept that the initial assessment required on all new cases was contracted out to LaRabida Hospital and other contractors. Yet caseload requirements for DCFS' less than well qualified caseworkers remain the same--although part of the work is being done by LaRabida et al--making the whole case more costly.

Only one example, and there are hundreds of similar ones across state agencies, of government ripping off the taxpayer. Yet Mr. Lawrence, Ralph Martire, and other tax friendly commentators rarely mention the reform of corrupt and inefficient state bureaucracy and upgrading of staff credentials to meet 21st century needs.

They want us to pay more money for the same old bad stuff.

 
At January 19, 2006 at 6:17 PM, Anonymous Former government employee said...

Cassandra,

The largest growth items in the Illinois budget every year, by far, are healthcare and public pensions (if the state decides to fund them). Government employment growth is not a big cost driver, nor is education. Neither has growth rates anywhere near healthcare and public pensions.

You're obviously very upset with the state bureaucracy, but I'm not sure why. Actually it's none of my business. Somewhere along the line, state government must have disappointed you.

I used to be a state worker and when I left, it was to go to a job that pays significantly more. In fact, there are a large number of valuable state employees that could take their skills and earn more in the private sector. Also know that Illinois has one of the smallest ratios of state employees per capita of any state in the nation. I know when I left government, there were many many staffing voids across state government. Enough of the defense of state employees.

FYI, an average state worker earns about $55,000 per year and with healthcare, life insurance, and pensions (inflated due to deficit funding over time) the total tab is about $75,000. However, most state employees earn less than the average, with the median values somewhere around $45,000/$63,000.

Also, your DCFS caseload example made me chuckle a little. If you had 4 children and they all moved out of your house, would your mortgage go down? Would your car payment decrease? Would you have less furniture? Some functional costs are fixed no matter how large the caseload.

Back to the subject, Illinois has monsterous funding inequity problems across districts due to the funding structure (local property taxes vrs state taxes). In order to remedy the funding inequities, there would have to be a major education funding restructure and an acceptance from rich districts to take a hit in their funding allocation. For many reasons, the "Robin Hood" shift in funding sources and reallocation is going to have to be incremental, but until it starts, Illinois schools are going to continue have increasingly uneven results.

 
At January 20, 2006 at 7:27 AM, Blogger JB Powers said...

FGE,

Are you counting state mandated workers at Schools, (empty) Prisons, (empty) Hospitals, contractors, the army of contract highway workers, or just the core group working for the state?

Healthcare and Pensions are directly proportional to State Hires (contractor or otherwise), and they keep going up because State hiring (one way or another) keeps growning.

Please remember Robin Hood stole from the Government (Prince John, Sir Guy of Gisbourne, Sheriff of Nottingham) and gave to the poor.

If you are looking for Robin Hoodisms, why not remove some ill-gotten gain from, say McCormick Place cronies, to fund schools?

JBP

 
At January 20, 2006 at 8:30 AM, Anonymous Cassandra said...

My concern about state government is that it is far costlier than it needs to be in an economic environment which counts the actual taxpayer/citizen as the least important part of the revenue process--as a victim even. And we citizens need to keep as much of our earnings as we can because increasingly, working Americans (except for government employees with their lifetime sinecures) must accept the responsibility and risk of funding their own retirement. Social Security isn't going to do it.
In effect, we have to generate our own "pensions" through savings. It takes a lot of money to generate a decent retirement income. Not everybody has a multimillion dollar campaign fund to draw on in an emergency.

I simply don't agree that there are state employees who remain in their jobs despite the possibility of riches elsewhere. If they are in a union or civil service protected job they have lifetime employment regardless of performance, almost-free health care and almost-free lifetime pensions. Sure, they might be able to make higher salaries elsewhere.
But they won't get the low-cost health and pension or the security of knowing that they have a job whether they actually work or not.
That's why they stay.

And DCFS may have ongoing functional costs, but that's not what I'm talking about. I'm talking about paying extra for each new foster care case because DCFS and private agency caseworkers apparently have been deemed incompetent to do initial assessments on their cases. So the cost of each case goes up as the work they can't do is farmed out, increasing the total cost to the taxpayer. That's not an ongoing functional cost. That's a taxpayer ripoff. And we can no longer afford to ignore this ripoff and the many, many others that are occurring across state.

 
At January 20, 2006 at 9:25 AM, Anonymous Former Goverment employee said...

For the state government bashers, let me point out that government administrative costs for providing services, such as healthcare, are much less than private sector administrative costs. That doesn't make government better, it just makes it cheaper. And state workers do, in fact, enjoy employment security, in part, because the state isn't going to go out of business. So they have security, relatively modest pay, but nice benefits. Government employees are still cheaper in most cases than privatizing functions. If you want to compare, the hourly billable rates under the IBM master contract with CMS are like $100/hr (or more) compared to 30% of that rate for a state employee. Where do you suppose I'm going to look for employment if I'm a programmer? Again, cheaper isn't better - it's just less costly.

I will be the first to concede that pension benefits for state employees has now become too generous relative to private sector benefits. But, the huge pension funding problems now are really the result of chronic underfunding in the past. That's the problem with deferring obligations - they don't go away. They just get larger.

Last year, it was teacher pensions that were targeted. This year, or more likely next year, state worker pensions will be reformed. I say next year, because the pension obligation deferral ends after this year, and it will grow by about $1.6 -$1.8 billion next year. So we'll hear again why state workers are bad, lazy, incompetent, etc. because the pension problem will come back in a huge way.

 
At January 20, 2006 at 11:10 AM, Blogger JB Powers said...

FGE,

There is no need to bash "lazy, incompetent etc" State Government workers, because in general there is no need for these workers in the first place. We don't need the contractors, nor do we need the Full Time Employees. We don't need the oversight, we don't need FTE working at Driver's License Facilities, suing gas stations, regulating the moving industry, squashing competition in healthcare via the Healthcare Facilities Management Board nor doing any of the thousands of things that the State has dreamed up to increase its spending.

Consider, do we really want the Illinois Commerce Commission to be more efficient at preventing Moving Companies from operating in Illinois? The Commission is horrible and quite lazy on purpose, as the general public wants more competition and choice in Movers, and may want to move there own furnitue. So, by design, we have a miserable (and near powerless) group of State Employees whose only function is to thwart legitimate business from competiting with established Movers.

It is unecessary for everyone involved, except for the State to reward political workers, and gain more power (and pensions) for the State.

Replace movers with Hospital Builders, Road Contractors, Liquor Distributors, and you can reduce government spending and build business throughout Illinois.

 

Post a Comment

Links to this post:

Create a Link

<< Home