Illinois Democrats are attempting to muscle through a so-called “fair tax” by amending the Illinois Constitution to eliminate the flat tax. Their strategy has all the subtlety of a shakedown.
Given Democrats’ “pass it or else!” attitude, the “scare tax” seems a more appropriate name. Here’s a Halloween peek at the Democrats’ two-step strategy for raising taxes in 2020 and beyond.
Step 1 is eliminating Illinois’ flat tax via constitutional amendment. First, Democrats will try to convince voters why this is necessary. Due to the Trump revenue bump, Illinois enjoyed a surprise revenue surplus. This bit of good fiscal news was the grease for getting a budget passed.
But spending increased much more than revenue did, and overspending in 2019 helps the Democrats as we enter 2020 and 2021. Here’s how:
This year’s spending spree creates room for spending cuts next year, just as rug merchants of lore raised prices to offer exaggerated discounts to lure the unwary. Indeed, Democrats are already rounding up ideas for cuts, but they are not discussing, much less driving, the structural reforms needed to address Illinois' fundamental financial problems.
That's because Illinois’ fundamental financial challenges are a result of the Democrats’ “Chicago Way;” offering government employee unions sweet deals in exchange for support. With reforms that impact their governing coalition off the table, Democrats obsess over raising revenue to fund their status quo – and they understand that spending cuts will be demanded in connection with a tax hike.
So, much like Inspector Renault did in Casablanca, Democrats round up spending cuts they can live with to feign fiscal probity.
Spending in 2019 will exceed revenues, creating a deficit in the 2020 budget; we should expect an "unanticipated fiscal crisis,” which will justify the Democrats’ pro-tax push next year.
“Shocked” by this “surprise” deficit, Democrats will argue this crisis can be fixed with more revenue and that all of the revenue will be obtained from the rich – but only if voters know what’s good for them and vote for the “fair tax.”
And if voters don’t agree to do as Democrats demand? Democrats will argue that the government will fail without new taxes. Those taxes have to come from somewhere; so, tax the rich or be taxed yourself!
And what will happen if the people of Illinois approve the “fair tax,” thereby eliminating the constitutional protection against arbitrary tax rates? Will doubling the tax on the rich spare the rest of us from paying more taxes too?
Of course not.
The Democrats’ “scare tax” won’t spare anyone for two reasons: First, their tax won’t raise as much as Democrats advertise because the proposed new tax and Illinois’ entrenched structural problems are already scaring people away to more tax-friendly havens. Second, Illinois’ structural problems are simply too severe to be fixed by raiding the pockets of a few thousand people.
Which brings us to Step 2 of the Democrats’ strategy: tax everyone else.
Lower-than-projected revenues from the “scare tax” will leave a large and growing hole in Illinois' finances. Guess whose pockets Democrats will raid in 2021, seeking the billions they inevitably need. Having doubled tax rates on the vanishing rich, Democrats will seek a "much lower" increase in taxes on everyone else.
Make no mistake: taxing the rich is only a speed bump on the road to higher taxes for everyone. The only way to avoid higher taxes is to stop enabling Democrats by raising taxes every time Democrats yell “Boo!”
It’s time to force Democrats to fix the structural financial issues fueling Illinois’ demise. That means voting no on the “fair tax.” Cutting off new tax revenue will force Springfield politicians to deal with its fundamental problems. That is the first step toward inviting back to Illinois the productive and ambitious who have been scared away.