Jim Dey: Quinn, Madigan and the politics of taxation

Jim Dey: Quinn, Madigan and the politics of taxation

When Illinois Gov. Pat Quinn scheduled a campaign stop at a Chicago elementary school Thursday, Republicans took the opportunity to score some political points by leveling tongue-in-cheek, but still pointed, criticism.

It came in the form of a character cast as "Quinnocchio." Carrying a sign that read "I lied about your taxes," Quinnocchio and his long nose spoofed Quinn's announcement last week that he wants legislators to make the state's temporary 5 percent income tax permanent.

The tax rate is scheduled to fall to 3.75 percent on Jan. 1, but Quinn contends that the revenues are necessary to pay for existing programs.

While Republicans were lampooning Quinn, Democrats in Springfield were pursuing more serious business in their effort to tag Quinn's Republican opponent, Chicago businessman Bruce Rauner, as just another selfish, out-of-touch multi-millionaire. It came in the form of a political fastball aimed at Rauner's head by master strategist and Democratic House Speaker Michael Madigan.

Madigan proposed and the Democratic House Budget Committee passed last week the so-called "millionaire's tax" amendment aimed at a small group of rich Illinoisans who include Rauner. The proposed amendment to the Illinois Constitution would require that wealthy individuals pay an additional 3 percent tax on their incomes over $1 million.

Madigan estimates the tax would raise an additional $1 billion a year in new revenue, pledged the money would go to support education programs, and dared Republicans to come out against the proposal and, by his reading, in favor of the wealthy.

Politics often trumps policy for the secretive Madigan. But this political move has potentially dramatic policy consequences, some of which could blow back on his fellow Democrats.

In pushing his millionaire's tax, Madigan is trying to squelch other proposals for a progressive tax plan embraced by many Democrats, including Gov. Quinn and local Democrats like state Rep. Naomi Jakobsson and state Sen. Michael Frerichs. Although Madigan's millionaire's tax is really another version of a progressive income tax, it shunts aside revenue plans put forth in separate proposed progressive tax plans promoted by Jakobsson and Democratic state Sen. Don Harmon of Oak Park.

Further, Madigan's plan not only proposes a 3 percent surtax on a small group of people — unlike the proposed rates in the Harmon/Jakobsson plans, it also puts Madigan in the familiar position of rejecting proposals widely backed by the super-majority of liberal Senate Democrats.

Madigan contends this is about policy, but rival Republicans say he's trying to spark a heavy turnout in the fall election by emphasizing the income inequality issue. Given that Illinois is an overwhelmingly Democratic state, the greater the turnout the more Democratic candidates can be expected to benefit in a non-presidential election year when turnout traditionally falls.

"This is about creating class warfare in the governor's race," said state Rep. Chad Hays, a Catlin Republican.

Will it work?

"I don't know," said Hays.

No one else does either, not even Madigan, although he is placing his faith and energy in his unusual tax plan.

But it's not the only tax hike plan drawing attention in Springfield. Indeed, there are several in play.

Madigan proposed his millionaire's tax in the form of a constitutional amendment, which is necessary because the Illinois Constitution mandates a flat tax. The Illinois House and Senate must approve it by a three-fifths majority by May 4 to put the issue on the ballot. Democrats enjoy veto-proof majorities in both houses and can put it on the ballot without GOP support.

For it to become law, the amendment must be approved by either three-fifths of those voting on the question or a majority of those voting in the election.

Quinn, whose office is not a participant in the amendment process, said the Madigan tax plan is "worth considering." But he's a longtime supporter of a progressive income tax that assesses higher levels of tax on higher levels of income.

J. Fred Giertz, an economist with the University of Illinois' Institute of Government and Public Affairs, said he's more impressed with the political appeal of Madigan's proposal than the policy consequences.

"You don't want to write a tax rate into the Constitution," he said. "It's a bad idea to do it that way."

Giertz also said that levying an 8 percent tax state rate (the current 5 percent plus the 3 percent surtax) on millionaires combined with Obamacare taxes on high earners and federal tax rates approaching 40 percent would add up "to a pretty high marginal rate."

"Millionaires are some of the most mobile people around. I suspect a lot of the (estimated) revenue would probably dry up and go elsewhere," he said.

In addition to Madigan's millionaire tax, legislators have proposed different versions of a progressive income tax, which also would require a constitutional amendment. While approving the millionaire's tax, the Democratic-controlled House Budget Committee last week rejected another proposed progressive income tax amendment.

Democrats, like Madigan, are skeptical of the political appeal of amendments like Jakobsson's because they allow progressive rates without stating what those rates are. Jakobsson has recommended specific rates, but legislators could approve whatever they please, a reality that permits opponents to warn voters that everyone's taxes could be increased.

Finally, Quinn last week proposed making permanent a tax plan that Democrats promised four years ago would be temporary. In January 2011, a lame-duck legislature increased the state's 3 percent income tax to 5 percent, promising that the 5 percent rate would be reduced to 3.75 percent on Jan. 1. Now Quinn has abandoned that pledge, prompting Madigan and Senate President John Cullerton to say that they will try to pass the permanent extension by the end of May.

"That would certainly be our preference. We absolutely want that done by the end of May," said Abdon Pallasch, Quinn's spokesman on budget issues.

Pallasch said making the temporary tax permanent is a higher priority than any constitutional amendment because the proposed state budget takes effect on July 1 and public bodies that will be affected must be able to plan ahead.

"We need to get it done now so school districts know they're going to have the revenue," he said.

Whatever transpires in Springfield, it's the Democrats' call. Because they control the governor's office as well as the House and Senate, they can ignore the GOP.

While lacking the ability to either pass or block legislation, Republicans are free to speak out. That's why legislators like Hays and Senate Republican spokeswoman Patty Schuh argue that Democrats once again want to raise taxes after trying and failing to solve the state's financial woes with the 2011 tax increase.

Hays ridiculed the notion that Illinois doesn't have sufficient revenue to go around, pointing out that the state has never had more revenue than it has now.

He said it's a matter of priorities, and the Democrats' spending priorities are focused on Medicaid and public pensions, not public education.

"This notion that there is no money is an out-and-out untruth," he said.

Jim Dey, a member of The News-Gazette staff, can be reached at 351-5369 or jdey@news-gazette.com.

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