The most important referendum in 2019 was the effort to get Colorado voters to eviscerate the Taxpayer Bill of Rights. Fortunately, the people of the Centennial State comfortably rejected the effort to bust the state’s successful spending cap.
The most important referendum in 2020 will ask voters in Illinois whether they want to get rid of the state’s flat tax and give politicians the leeway to arbitrarily impose higher rates on targeted taxpayers.
I’ve written many times about how a flat tax is far less destructive than so-called progressive taxation.
And I’ve also written that Illinois’ flat tax, enshrined in the state constitution, is the only decent feature of an otherwise terrible fiscal system.
So if the politicians convince voters to get rid of the flat tax, it will hasten the state’s economic decline (if you want more information, I strongly recommend perusing the numerous reports prepared by the Illinois Policy Institute).
Today, though, I want to focus on politics rather than economics.
To be more specific, I want to expose how supporters of higher taxes are using disingenuous tactics.
For instance, the state’s governor, J.B. Pritzker, warns that he’ll have to impose big spending cuts if voters don’t approve the referendum.
Gov. J.B. Pritzker said the state’s next budget will be balanced, but said if voters don’t approve a progressive income tax in November, he would have to reduce state spending across the board in future years. …the governor said 15 percent cuts in state spending would be needed across the board. …Illinois’ most recent budget called for spending about $40 billion dollars in state money. The state spends another $40 billion of federal tax money. …Pritzker is set to deliver his budget address on Feb. 19. He said he will propose a balanced budget to begin in July without relying on revenue from the proposed progressive income tax.
For what it’s worth, I actually think it would be good news if the state was forced to reduce the burden of government spending.
But that’s actually not the case.
How do I know Pritzker is lying?
Because his own budget documents project that state revenues (highlighted in red) are going to increase by nearly 2 percent annually under current law.
In other words, he wants a tax increase so he can increase overall spending at an even faster pace.
Of course, his tax increase also will increase the pace of taxpayers fleeing the state, which is why the referendum is actually a form of slow-motion fiscal suicide.
But let’s set that aside and examine another lie. Or, to be more accurate, a delayed lie.
The politicians in Illinois already have approved legislation to impose tax increases on the state’s most successful taxpayers, though the higher rates won’t actually become law until and unless the referendum is approved.
In hopes of bribing voters to approve the referendum, supporters assert that the other 97 percent of state taxpayers will get a cut.
That’s true. Most taxpayers will get a tiny reduction compared to the current 4.95 percent tax rate.
But how long will that last? Especially considering that the state’s long-run fiscal outlook is catastrophically bad?
The bottom line is that approving the referendum is like unlocking all the cars in a crime-ridden neighborhood. The expensive models will be the immediate targets, but it’s just a matter of time before everyone’s vehicle gets hit.
Indeed, this warning has such universal application that I’m going to make it my sixth theorem.
By the way, this theorem also applies when an income tax gets imposed, as happened with the United States in 1913 (and also a lesson that New Jersey residents learned in the 1970s and Connecticut residents learned in the 1990s).
P.S. Here are my other theorems.
- The “First Theorem” explains how Washington really operates.
- The “Second Theorem” explains why it is so important to block the creation of new programs.
- The “Third Theorem” explains why centralized programs inevitably waste money.
- The “Fourth Theorem” explains that good policy can be good politics.
- The “Fifth Theorem” explains how good ideas on paper become bad ideas in reality.
P.P.S. Pritzker is a hypocrite because he does everything he can to minimize his own tax burden while asking for the power to take more money from everyone else.
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Re: “The most important referendum in 2019 was the effort to get Colorado voters to eviscerate the Taxpayer Bill of Rights.”
Unfortunately the Colorado Supreme Court has eviscerated the Taxpayers Bill of Rights (TABOR). The Colorado Supreme Court has ruled for the government — and against taxpayers for every TABOR case that his come before it since TABOR was approved by Colorado voters in 1992, and they always will rule in favor of the government. Therefore the vote was more symbolic than anything else.
A flat tax (starting at zero) would allow employers to file accurate withholding and file on behalf of their employees. So no annual tax filing, unless you have business income (even a small sideline).
A flat tax at the federal level is a political loser in today’s climate.
However, a flat tax paired with a UBI becomes progressive. How progressive depends on the amount of the UBI.
Collection of the flat tax can be separated from distribution of the UBI, making it incredibly efficient. The compliance time for filling out tax forms would drop from 7-8 billion manhours to less than 2. That’s the equivalent of adding 2 million highly productive people (they pay taxes) to the current workforce of 165 million, or about +2% to national growth.