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Written by: Matthew McGuire
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Bruce Rauner, current Illinois governor, has delivered his proposal for 2015 Budget Address Wednesday, February 18, 2015. Since that moment he has been the center of controversy in Illinois.
con·tro·ver·sy
-
disagreement, typically when prolonged, public, and heated.
The biggest problem that Rauner faces is that his budget proposal only suggests spending cuts to the budget and not raising taxes. I would be far more supportive if he did a combination of the two, but when an agenda is so one sided, it shows the real problem. That problem is the Illinois tax system that has been underpaying the pension system in this state for decades, and carelessly assumes that cutting operational costs will make a large difference. (Bruce Rauner’s 2015 Budget PDF).
What costing costs does do is create media buzz to distract individuals from creating solutions to help fix the matter.
The word ‘controversy’ seems to fit Rauner’s time in office. If you watch the Khan video below one will notice that the Illinois Pension problem has been prolonged for decades. It is not the governors fault that he is stepping into a deep rooted problem, but the method that he is choosing to go about fixing the issue lacks logic. It is my goal to provide solutions on how to fix the budget in Illinois.
The first step in fixing any problem is to identify the key factors that are causing the issue. First we look at the current budget and where the largest factors are influencing the state. This is my second article on solving the state’s budget problem, and I am starting to see it as being like a puzzle that one has to see the whole picture before moving the pieces into place.
On that note, I am starting to see the procedure of balancing a budget, and no longer have ill feelings toward Rauner, but rather a deeper understanding of the time it takes to grasp the big picture, and the ambition to solve the problem. Even when tens of thousands of people agree and disagree with you over the decision making process.
“Solving this year’s crisis will eliminate $1.6 billion from next year’s deficit. Let’s get it done. Even after we solve this year’s crisis, we will still be left with a budget hole of $6.2 billion for the coming fiscal year.” – Bruce Rauner
- The state is in debt $6.2 billion, and has a yearly deficit of $1.6 billion. Illinois has $111 billion in unfunded pension liabilities
We currently have the worst pension debt in the country. The pension debt is the biggest financial burden within Illinois.
- In 2013, the GDP of Illinois was 671.40 billion U.S. dollars. (Source at: http://www.statista.com/statistics/187863/gdp-of-the-us-federal-state-of-illinois-since-1997/)
Flat Tax vs. Progressive Tax
Next, we take a look at how Illinois is taxed in comparison to other states. Rauner has noted in February 2015 that the Illinois prison system may run out of revenue in April 2015. That should be a huge red flag to the people living in this state.
After reviewing the cuts Rauner has suggested, I find that they are no where near enough to balance the budget. It will take years of cuts, to make a dent in the debt for the state. Illinois is the largest state in population using the broken flat tax method. That should also raise a major red flag. When one assumes that we cannot raise taxes, there is data showing we are not at the top of taxation among the states, and if our prison system is about to run out of revenue, there should be someone in politics in Illinois that has the intelligence to see this problem, and move to a progressive tax system.
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Scan over how the state compares to other states when it comes to taxation.
- State and local tax burden per capita in 2010: ninth-highest in the nation
- State and local tax burden in 2010: $4,512 per capita
- State and local tax burden as a percentage of state income in 2010: 10.2 percent
- 2013 sales tax, combined state and local, in 2013: 12th-highest, 8.13 percent
- Median property taxes paid on homes in 2010: seventh-highest, $3,507
- Median property tax as a percentage of home value in 2011: second-highest, 1.91 percent
- Gasoline tax in 2013: fifth-highest, 0.39 cents per gallon
- Alcohol taxes per gallon in 2013:
- Beer: 27th-highest, 0.23 cents
- Wine: 10th-highest, $1.39
- Spirits: 14th-highest, $8.55
- Cigarette tax in 2013: 15th-highest, $1.98 per pack
- State and local cell phone tax in 2012: fifth-highest, 15.9 percent
- Estate tax in 2010: 13th highest, $2,418 per death
- Travel taxes in Chicago per day in 2012: highest in the nation
- Income tax collections per capita in 2011: 22nd-highest, $873
- Corporate income tax in 2011: fourth-highest, 9.5 percent
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“There’s always money in the banana stand.”
Imagine you are working any kind of business that brings in taxes/revenue, lets think of a lemonade stand for a business. A person starts the business on Monday with supplies bought from their parents. The total cost to operate the stand is $15 per day. The stand makes $20 per day on average each day for the first week. That would relate to a $35 profit before paying back their parents.
During the second week one would only make $15 per day. That would mean one worked all week for no pay, and made no money. In the third week, the stand brings on a friend to help run the stand. During the third week, the stand only makes $15 per day. After not making money again, one would have to pay out their friend for helping. So, they use $5 from the money made in the first week. The same thing happens again in the fourth week.
Now stop and think for a second. What makes more sense, to raise prices, or to cut back on sugar and lemons?
“When life gives you lemons, make lemonade.”
Let’s use Rauner’s budget as an example of cutting back on services and support.
It lack logic to assume cutting costs year after year is the only method to solving this issue. The idea of cutting costs and raising taxes is the more logically approach to this problem.
logic
noun log·ic \ˈlä-jik\: a proper or reasonable way of thinking about or understanding something
: a particular way of thinking about something
: the science that studies the formal processes used in thinking and reasoning
Khan Academy on the Illinois Budget
Source information at: http://www.pewstates.org
National News
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