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Should Illinois Move to Progressive Taxation?

Should Illinois Move to Progressive Taxation?. YES!!. Why? For 8 Reasons:. Historical Support Eliminate “Structural Deficit” Will of Illinois Voters Needs of low-income IL families “No-Tax Floor” or “Poverty Tax Credit” Cost Effectiveness of low-income taxes? Religious Support

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Should Illinois Move to Progressive Taxation?

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  1. Should Illinois Move toProgressive Taxation? YES!!

  2. Why?For 8 Reasons: • Historical Support • Eliminate “Structural Deficit” • Will of Illinois Voters • Needs of low-income IL families • “No-Tax Floor” or “Poverty Tax Credit” • Cost Effectiveness of low-income taxes? • Religious Support • Proposed IL plans are both Progressive

  3. Progressive Taxation is: A tax is progressive when the percentage of income that goes to pay the tax increases as income increases. The U.S. Federal income tax is an example of a progressive tax.

  4. Proportional Taxation is: A tax is proportional/regressive when the percentage of income that goes to pay the tax decreases as income increases. General sales taxes are usually regressive.

  5. Adam Smith on Progressive Taxation from Wealth of Nations “The subjects of every state ought to contribute toward the support of the government, as nearly as possible , in proportion to the revenue which they respectively enjoy under the protection of the state….a goal of taxation should be to ‘remedy inequality of riches as much as possible, by relieving the poor and burdening the rich.”

  6. Smith Means: That under capitalism, affluent income classes will always benefit disproportionally from economic expansion. Since the greatest benefits would go to upper income classes, fairness dictates they ought to have the greatest tax burdens, to support the government that delivers such economic benefits to them.

  7. Who is Adam Smith? • Father of modern capitalism according to most economists. • A philosopher and economist during the “Enlightenment.” • The greatest of all conservative economists, and many would claim the greatest economist of any kind.

  8. What happens to Real Wages under a Proportional Tax SystemBy: Center for Tax and Budget Accountability (CTBA)

  9. Structural Deficit Illinois has a structural deficit and will continue to have a structural deficit if they do not move to a progressive tax system.

  10. What is a Structural Deficit? • A structural deficit occurs when the long-term growth rate of state expenditures exceed the long-term growth rate of state revenue. • If a tax system is considered sustainable and without structural deficit, it must yield a stream of revenue that grows at the same pace as the services it is intended to fund and both should grow with rate of the economy. • This means that the Illinois tax system does not have the ability to generate enough funds to keep up with growth and service needs of the state caused by the growth of the economy.

  11. Progressive vs. Proportional Tax RevenueBy: Institute on Taxation & Economic Policy (ITEP)

  12. The will of the Illinois People? A 2008 survey by the Paul Simon Public Policy Institute finds that 66% of respondents favor a progressive income tax in Illinois, to replace the present flat tax. The “People” know what is right and FAIR!!

  13. Illinois Proportional Tax vsProgressive States TaxBy: Institute on Taxation & Economic Policy (ITEP)

  14. The “Needs” of the People? Should we cut healthcare, food stamps and assistance for the many low-income families of Illinois? NO!! By remaining on a proportional tax system the current state deficit will force the state to cut these services for low-income families.

  15. Inequity of Proportional TaxBy: Institute on Taxation & Economic Policy (ITEP)

  16. Is Low-income Taxation Cost Effective for Illinois? NO • A couple with an income of $10,000 would pay a tax of $240. Considering the administration costs of processing an income tax filing in Illinois, it is questionable whether it makes sense for the state to bear the costs associated with collecting $240 from this prototypical low-income couple. • Low-income families figure their income only because Illinois requires them to calculate their tax liability, not because they have been required to file federal tax returns. • These filing requirements place an additional and unfair financial burden on Illinois’ low income families.

  17. “No-Tax Floor” or “Poverty Tax Credits” • A “no-tax floor” is a program which shields extremely low-income families from paying any income tax. • A “poverty tax credit” is a credit designed to reduce income taxes to zero for families below the poverty line.

  18. Say “No” to Increased Exemptions • Increasing the per-person exemption from $2,000 to $6,000 (for example) reduces taxable income by the same $4,000 amount for a minimum-wage worker and a well-paid stockbroker. • A “Poverty Tax Credit” or “No-tax Floor” would help the extremely poor by reducing their tax burden without changing the tax burden of the wealthy.

  19. Judeo-Christian Support for a Progressive Tax System • Most mainstream religious groups consider the Biblical injunction to support the poor as requiring or, at least, supporting progressive taxation. • Many scholars contend that the tax rate was varied with social status. • To the extent that progressive taxation is seen as redistributive and designed to help the poor, it is consistent with the broad principles found in the Bible and Talmud, regardless of whether any one tax system, taken in isolation, allocates its burdens in some other manner, or regardless of how any one tax system operated.

  20. Current Taxation Proposals byQuinn & Hynes • Governor Quinn would raise tax deductions and the income tax rate both. By these actions he proposes to lower the taxes on low income families and increase taxes for middle and upper income families. • Hynes would simply replace the current proportional tax rate with a progressive tax rate. His plan would implement neither a tax increase or tax decrease for families with an income of $200,000 or lower. • We find that two leading candidates for Governor of Illinois both support a progressive tax rate. Both plans will lead to a more progressive and a fairer tax system for the State of Illinois.

  21. Say “Yes” to Progressive Taxation • Historical Support • Eliminate “Structural Deficit” • Will of Illinois Voters • Needs of Low-income IL Families • “No-Tax Floor” or “Poverty Tax Credit” • Cost Effectiveness of Low-income Taxes? • Religious Support • Proposed IL plans are both Progressive

  22. Should Illinois Move toProgressiveTaxation? YES!!

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