Fred Klonsky writes here about Illinois’ inequitable flat tax. Black and brown communities have paid $4 billion more than they would have if the state had a progressive income tax.

Categories Illinois, Inequity, Injustice, Racism

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retired teacher says:

September 25, 2020 at 11:17 am

Remember the late Herman Cain and his 9-9-9 platform. Luckily his campaign fizzled. Flat taxes are regressive taxes for the poor and working class, and wealthy individuals end up paying less relative to the amount of money they have. Also, many states and communities prefer to raise their sales tax instead of their income or property taxes. Raising sales taxes is another way for the rich to pay less in proportion to their wealth while the poor and working class pay more compared to the amount of money they earn.

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carolmalaysia says:

September 25, 2020 at 11:23 am

My financial advisor who lives in Illinois yesterday gave his first online talk to his clients. I was furious when he told people to NOT vote for the progressive income tax that is on the election ballot. [I live in Indiana so I have no say in this.]

He is a multi-millionaire who also got a government stimulus check for his privately owned investment company in which there are two people besides his two children who work for him. Grrrr. He owns 51% and his wife owns 49% of the company.

Thanks for the blog from Fred Klonsky. I’m sending it to my financial advisor who said he wanted comments back from us.

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- carolmalaysia says:
  
  September 25, 2020 at 4:07 pm
  
  I got a comment back from my financial advisor. Anyone want to comment back on this?
  
  Hi Carol,
  
  Thanks for your comment and we appreciate your contacting us to send your article. What they are saying is correct but they stop right there and bring up nothing else. Making everyone think that makes sense .
  
  You can go back and listen to what I said. This amendment is all about Trust. Legislators in Illinois over the years have never done what is in the best interest of anyone but themselves
  
  They Can raise tax rates right now and don’t need to ask anyone. They don’t because they know they will get thrown out of office.
  
  Remember what I said. By passing the Illinois Constitutional amendment the state would be able to tax anyone anything they want. They could even start taxing residents on their IRA distributions as they pleased.
  
  We are already the second highest tax rate In the country on property taxes. If passed we would be the second highest business tax in the country. And Cook County later this year will be the highest sales tax in the country.
  
  We are also #1 in something else also. The #1 state in people Moving Out of a state.
  
  As for your pension there is no faster way for you to loose it than if this passes in my opinion. The more people that leave the state the less there are left to pay for your pension
  
  Remember, it is not about what black or brown or white or green people pay in taxes. It is about spending LESS not taxing more.
  
  Funny your article says nothing about how much blacks, browns, whites, or green people are paying proportionaly for property and sales taxes. That is MUCH more of a problem than the state income tax.
  
  The new tax will bring in about 3.8 Billion in new taxes. The state in various estimates will be short about $10-$13 Billion short next year and every year thereafter.
  
  It is estimated that the tax rate on EVERYBODY in the state would have to be around 9% on EVERYBODY to just break even on what they spend. That gives you some idea how bad off the state of Illinois really is.
  
  If this Amendment was tied to dollar for dollar reductions in property taxes for the poor I would be all for it.
  
  If it was being done to lower sales taxes on the poor in the state dollar for dollar I would be for it.
  
  If was to reduce corporate taxes dollar for dollar for those companies that hired the poor I would be all for it.
  
  This will do none of that.
  
  So back to trust. The state needs to spend Less not tax more. Passing this amendment just will ultimately make things even worse for people living in the state.
  
  There just aren’t enough rich people in the state if they taxed them at 15% to pay the bills.
  
  Look at California. There top rate is going to 16.8% and they are just in as much trouble as Illinois. Didn’t work there and won’t work here.
  
  Also this is the first year now where more people are moving out of California than moving in. And as you can imagine they are the wealthy moving out not the poor.
  
  There is a good chance in the future that states like California and Illinois May have to file for some type of bankruptcy if they don’t change their ways.
  
  Hope this helps and go out and vote this year no matter who it is for.
  
  Have a good weekend
  
  Reply
  - Joe Jersey says:
    
    September 25, 2020 at 5:09 pm
    
    Ha, ha, ha!!! The anti-tax people in NJ say the same things. They say, boo hoo, NJ has the highest taxes (not really) in the country, the highest property taxes (that part is true) and everybody is fleeing NJ because of the taxes. While it is true that NJ property taxes is the highest in the nation there are other states that are close to NJ and the other taxes in NJ are about the same as most of the wealthier states. NJ is still gaining in population but it is a very small gain each year. So what, NJ is the MOST densely populated state, we don’t need some population infusion. NJ has amongst the highest percentage of millionaires and billionaires in the country. The wealthy are not fleeing NJ in droves as the anti-tax people claim.
  - dienne77 says:
    
    September 25, 2020 at 5:46 pm
    
    Take Fred Klonsky’s advice and lose your financial adviser.
  - Joe Jersey says:
    
    September 25, 2020 at 7:32 pm
    
    This financial adviser’s fear mongering about California is ludicrous, ridiculous and hysterical. From wikipedia: The economy of California is the largest in the United States, boasting a $3.2 trillion gross state product as of 2019. If California were a sovereign nation (2019), it would rank as the world’s fifth largest economy, ahead of India and behind Germany. Additionally, California’s Silicon Valley is home to some of the world’s most valuable technology companies, including Apple, Alphabet Inc., and Facebook. In total, over 10% of Fortune 1000 companies were based in California in 2018, the most of any state.
    
    As both the most populous US state and one of the most climatologically diverse states, the economy of California is varied, with many sizable sectors. end quote
    The rich in CA can afford to pay more in taxes.
  - carolmalaysia says:
    
    September 25, 2020 at 7:42 pm
    
    Here was his response when I told him what Fred Klonsky had to say:
    
    I’m not concerned about his opinion. I have mine and he is entitled to his. We will never agree. Again, that is what makes this a great country.
  - retired teacher says:
    
    September 26, 2020 at 10:03 am
    
    Jersey Jazzman uses some of his analytic wizardry to debunk some of the common beliefs about New Jersey taxes.http://jerseyjazzman.blogspot.com/
Joe Jersey says:

September 25, 2020 at 11:23 am

Flat taxes are a libertarian BS garbage filth disgusting talking point. Flat taxes are great for the billionaires like Steve Forbes but terrible for ordinary working class people living from pay check to pay check. The flat tax is a con and a scam perpetrated and perpetuated by the libertarian propagandists. The same folks who are rabidly in favor of privatizing (killing off) Social Security, Medicare, Medicaid, and what’s left of the ACA.

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- Linda says:
  
  September 25, 2020 at 12:49 pm
  
  Bill Gates’ state of Washington has been described as the state with the most regressive tax structure in the U.S. The poor pay a rate up to 7 times the rate that Bill and Melinda pay. And, Bill has spoken out against minimum wage and public pensions. Gates gave $1,000,000 in a grant to Harvard’s Roland Fryer who wrote in favor of a two-tier public education system. We know who the privatizing billionaires want exploited In the bottom tier.
  
  Reply
  - ciedie aech says:
    
    September 25, 2020 at 1:57 pm
    
    billionaire — exploit. There it is
ShiraDest says:

September 25, 2020 at 1:58 pm

I thought it was well and commonly understood that flat taxes are regressive and damaging to the non-rich. More education needed for all.

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- Teachingeconomist says:
  
  September 25, 2020 at 2:29 pm
  
  Flat taxes can be progressive depending on the level of exemptions in the tax law, but it is only if there is a maximum amount income subject to tax, like the taxes used to finance social security, that the flat taxes are regressive.
  
  If the single tax rate is 10% but the first $50,000 is exempt from taxation, a person making below $50,000 would pay no tax, a person making $100,000 would pay taxes at a 5% rate ($5,000/$100,000), a person making $250,000 would pay taxes at a 8.92% rate ($20,000/$250,000), and a person making $500,000 would pay taxes at ($45,000/$500,000) a 9% rate. Because of the exemption, the proportion on income going to taxes increases as income increases.
  
  Reply
  - dienne77 says:
    
    September 25, 2020 at 5:44 pm
    
    By definition, what you’re talking about is not a flat tax.
  - ShiraDest says:
    
    September 26, 2020 at 8:52 am
    
    Thank you, good point: I thought flat was a simple flat percentage rate for all taxpayers, which ends up costing the poor the most.
  - retiredbutmissthekids says:
    
    September 26, 2020 at 9:24 am
    
    TE: You sound like carol’s financial “advisor.” (As so many have said, carol: drop him!). So many times you comment, here, on education issues glibly, & ,seemingly for the sake of argument only. IMO, you do not know or understand K-12 education very well (you are a college/university professor?). So, that part might be understandable.
    That having been said, in agreement w/Dienne’s comment below, we might expect you to know something about the flat tax, but it seems you don’t.
    Enough said.
  - Teachingeconomist says:
    
    September 26, 2020 at 9:34 am
    
    Dienne77,
    
    If you believe that, then, by definition, the Illinois state tax is not a flat tax because it is structured exactly like my description: some income is exempt from tax and taxpayers pay a fixed percentage on the remaining income.
  - Teachingeconomist says:
    
    September 26, 2020 at 9:40 am
    
    Retired,
    
    I do know something about flat taxes which is why I contributed to the thread. Dienne77 is simply mistaken.
- Linda says:
  
  September 25, 2020 at 8:58 pm
  
  teaching economist should wear a warning label. He is viewed at this blog as a libertarian/social Darwinist. He relishes in the muddied waters that would prevent a drowning person from seeing a safe landing.
  
  Reply
Joe Jersey says:

September 25, 2020 at 10:36 pm

Flat taxes are a win win for the wealthy. They pay much less in taxes and the revenues go down so the libertarian austerians can scream for budget cuts (austerity) in the social programs that help the lower economic classes. It’s a great way to cripple government so you can drown it in a bathtub.

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- Teachingeconomist says:
  
  September 26, 2020 at 9:52 am
  
  Joe Jersey,
  
  Whether flat taxes result in the wealthy paying more in taxes than a progressive tax system depends on the top marginal rate of the progressive tax system. Ohio, for example, has five tax brackets with tax rates between 2.85% for taxable income between $21,750 and $43,450 to 4.8% for taxable income over $217,400. While Ohio’s taxes are progressive, a wealthy household would pay less in tax in Ohio than the same household would pay in Illinois. See https://taxfoundation.org/state-individual-income-tax-rates-and-brackets-for-2020/ for handy information about various state income tax structures.
  
  Reply
  - Joe Jersey says:
    
    September 26, 2020 at 11:13 am
    
    The flat taxes proposed by Steve Forbes or Ted Cruz result in the rich paying less in taxes. That’s the real actual whole point of the flat tax.
carolmalaysia says:

September 26, 2020 at 6:12 am

I just sent this to my financial advisor:
…………………………
We’re No. 28! and Dropping
Sept. 9, 2020
By Nicholas Kristof
Opinion Columnist

A measure of social progress finds that the quality of life has dropped in America over the last decade, even as it has risen almost everywhere else.

The newest Social Progress Index, shared with me before its official release Thursday morning, finds that out of 163 countries assessed worldwide, the United States, Brazil and Hungary are the only ones in which people are worse off than when the index began in 2011. And the declines in Brazil and Hungary were smaller than America’s.
“The data paint an alarming picture of the state of our nation, and we hope it will be a call to action,” Michael Porter, a Harvard Business School professor and the chair of the advisory panel for the Social Progress Index, told me. “It’s like we’re a developing country.”
The index, inspired by research of Nobel-winning economists, collects 50 metrics of well-being — nutrition, safety, freedom, the environment, health, education and more — to measure quality of life. Norway comes out on top in the 2020 edition, followed by Denmark, Finland and New Zealand. South Sudan is at the bottom, with Chad, Central African Republic and Eritrea just behind…

……………………….

Sep 7, 2017 ·
Illinois is a low-outmigration state, and other things you probably didn’t know about people moving in and out of the Land of Lincoln

Okay, more Americans are moving out of Illinois than into it — is that a new problem?

Nope. A recent report from KDM Consulting found that Illinois has had net negative domestic migration for close to a century: with the exception of a one-year blip in 1947, the last time more Americans moved into the state than out of it was 1920…
How much does taxes have to do with it?

It’s common to hear that people leaving Illinois — or avoiding it by not moving here — do so because of high taxes. But generally, researchers find that taxes are relatively low priority factors when people decide to move, falling far below things like being close to family, job markets, and housing costs, which often make a bigger difference in total cost of living than state and local taxes.

In Illinois, some commentators have pointed to a Southern Illinois University poll from October 2016 that found respondents who wished to leave the state cited taxes more than any other single issue. But even in that poll, 73 percent of respondents named an issue other than taxes as the reason for leaving.

On top of that, as you’ve seen, the evidence shows that Illinois’ migration problem isn’t so much about people in the state leaving, as people out of the state choosing not to move here…

https://budgetblog.ctbaonline.org/illinois-is-a-low-outmigration-state-and-other-things-you-probably-didnt-know-about-people-moving-ce3f0cd6ab4c

…………………………………………………
Pew Research Center
JANUARY 9, 2020

Upper-income households have seen more rapid growth in income in recent decades

The growth in income in recent decades has tilted to upper-income households. At the same time, the U.S. middle class, which once comprised the clear majority of Americans, is shrinking. Thus, a greater share of the nation’s aggregate income is now going to upper-income households and the share going to middle- and lower-income households is falling.9

The share of American adults who live in middle-income households has decreased from 61% in 1971 to 51% in 2019. This downsizing has proceeded slowly but surely since 1971, with each decade thereafter typically ending with a smaller share of adults living in middle-income households than at the beginning of the decade.

…………………
The Top 1% of Americans Have Taken $50 Trillion From the Bottom 90%—And That’s Made the U.S. Less Secure
SEPTEMBER 14, 2020

Like many of the virus’s hardest hit victims, the United States went into the COVID-19 pandemic wracked by preexisting conditions. A fraying public health infrastructure, inadequate medical supplies, an employer-based health insurance system perversely unsuited to the moment—these and other afflictions are surely contributing to the death toll. But in addressing the causes and consequences of this pandemic—and its cruelly uneven impact—the elephant in the room is extreme income inequality.

How big is this elephant? A staggering $50 trillion. That is how much the upward redistribution of income has cost American workers over the past several decades.

This is not some back-of-the-napkin approximation. According to a groundbreaking new working paper by Carter C. Price and Kathryn Edwards of the RAND Corporation, had the more equitable income distributions of the three decades following World War II (1945 through 1974) merely held steady, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in the year 2018 alone. That is an amount equal to nearly 12 percent of GDP—enough to more than double median income—enough to pay every single working American in the bottom nine deciles an additional $1,144 a month. Every month. Every single year…

https://time.com/5888024/50-trillion-income-inequality-america/?utm_source=email&utm_medium=email&utm_campaign=email-share-article&utm-term=ideas_covid-19

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- retiredbutmissthekids says:
  
  September 26, 2020 at 9:34 am
  
  carol: As per your usual, such good references & well-made points.
  I am wondering about that NYT picture, though, of the women w/the butterfly tattoo. Is she meant to represent the “lower class?”
  I find it to be NYT intellectual snobbery & offensive.
  Now that’s why I don’t buy the paper, but have read it in the library, when I’ve been able to get it for free at a hotel, or when it’s online & not behind a paywall–e.g.–“Sign up for free coronovirus news!”
  What, did NYT, like it45, expect it to go away?
  Yeah, it was free…for a while.
  Now, they’re sending the headlines, but putting the articles…behind a paywall!
  I realize they have to pay their journalists ($6.50 for Sunday!!!), but to paywall such important info.?
  “All the news fit to print”…but only to read for the top 1% of the top 10%!
  
  Reply
  - carolmalaysia says:
    
    September 26, 2020 at 9:57 am
    
    I agree with your comment about the lady with the tattoos. it is a bit degrading.
    
    I just sent my personal story to my financial advisor. Hope it isn’t too boring, but I’ve lived for too many years struggling to be happy about the wealthy getting more and more.
    ……………………………………………
    I just got one other important thought to give to you.
    
    I got divorced in 1982 and left the country to work in Bolivia in 1996. So, for ALL of those years that I worked in Illinois as an elementary school teacher, I was able to SAVE $50 ONE YEAR. That was the year that I joined the credit union in Bensenville, IL. I tried to save but never made enough to add to this amount.
    
    One year, when I was working in Chicago Heights, it was payday. I was running out of gas and the only money I had left was $.75. I put that amount in the gas tank and made it to school. Each pay period I’d put some money in the credit union but would have to take it out before the end of every two week pay period.
    
    When I lived in Park Forest, IL I picked up some individually wrapped chocolates to give out for Halloween. Two bags hadn’t been opened and I had to return them to the grocery store because I couldn’t afford such luxury. I kept my apartment at a cold temperature in the winter because I couldn’t afford to spend more on heating.
    
    When I’d take my daughter to McDonalds, which wasn’t very often, I’d buy her lunch but couldn’t afford one for myself.
    
    Now, you say that teachers’ pensions are too high and the state can’t afford to continue these payments? NO!
    
    The money I invested with you came from a divorce settlement. That money came from my mother-in-law who took out a second loan on the house my husband possessed. I was getting $200 a month in child support money and I still thought about money 95% of the time. Teachers’ pay was rotten. I had a masters degree and 15 grad hours and this is how I had to live.
    
    I lived like this because I figured the money from the divorce decree would be the only money I’d have when I retired. I tried to live on what I was earning. I had no idea that I would be working at the International School of Kuala Lumpur and for the first time make a decent amount of money.
    
    Ugh. Grr.
    Carol
  - Joe Jersey says:
    
    September 26, 2020 at 10:48 am
    
    carolmaylasia: I love all your comments, they are cogent, informative, sincere and valuable. You are far from being glib on any issue. When I started teaching my salary was $6,900.00/year. Of course in 1968, gas was about $.40/gallon but even for that time $6,900 was pathetic. Over the years my income did achieve actual middle class status, thanks to the union and the NJEA.
Callisto says:

September 26, 2020 at 7:56 am

I remember a time not so long ago when billionaire hack Steve Forbes’ flat tax line was literally a joke – imitated on SNL and mercilessly lampooned in wider culture. Now? Reality. The water for the tree of Democracy is an informed citizenry protective of the middle class not billionaires, religious zealots and morons who are impressed by Q’Anon witch doctors.

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Threatened Out West says:

September 26, 2020 at 8:21 pm

It is estimated that education in Utah has lost 1 BILLION dollars since the flat tax was instituted in the early 2000’s. Utah spends only about $7000 per pupil, teachers have some of the lowest pay in the country, and Utah’s class sizes are the largest in the country. Flat taxes are a HUGE detriment to public education.

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