In recent weeks, a chorus of voices claiming to represent the business community have come out against the “fair tax,” an Illinois ballot initiative for a constitutional amendment that would transition our state from a flat rate to a graduated-rate income tax — one that would raise taxes on just 3% of Illinoisans while cutting taxes or keeping them the same on the other 97%. Unfortunately, these voices, such as that of billionaire hedge fund manager Ken Griffin, are offering a narrative about the amendment’s impact on businesses that is not grounded in fact.
As an MBA student at the University of Chicago’s Booth School of Business, I know that the real challenge to attracting and retaining businesses is not the level of taxation but rather uncertainty about our state’s finances. And as a former senior aide to Chicago Treasurer Kurt Summers, I know that the graduated tax is critical to providing a lasting solution to that uncertainty so that the next generation of business leaders will want to put down roots here.
If we’re able to address our fiscal situation, then Illinois will once again become a top choice for up-and-coming business leaders because we have top-tier assets that are critical to any business’s success: an extraordinary talent pool, a well-diversified economy and a world-class logistics infrastructure.
But even with those assets, future business leaders need to know how our state will address its structural budget deficits, unfunded pension liabilities and long-term debt obligations. That’s why the pro-business Civic Committee of the Commercial Club has previously noted that “fiscal uncertainty and instability hurt our economy and cause many families and businesses to leave Illinois.” It’s unfortunate that this very group is now among the opponents of the graduated tax, despite having full knowledge that we can’t stabilize our finances without the additional $3.4 billion in annual revenue that it will bring.
Fortunately for us, a progressive state income tax is not an untested proposal but rather proven, pro-business policy. Thirty-two states now have progressive income taxes, ranging from politically liberal ones such as Vermont and Minnesota to conservative ones such as North Dakota and Louisiana. Even our more conservative neighbor Iowa has a progressive income tax, with far higher tax rates at lower income thresholds than what is proposed in Illinois.
With a progressive income tax in place is states across the country, it’s not surprising that people leaving Illinois often end up in states with higher rather than lower state income tax rates, as the Center for Tax and Budget Accountability found recently. When people and businesses leave Illinois, they’re not typically getting lower taxes — but rather higher taxes coupled with more fiscal stability.
The credit ratings agency Moody’s agrees, noting that a progressive income tax would “yield substantial net new revenue, without material damage to the economy.” Today, however, only about one out of every four Chicago Booth graduates make Illinois their home after graduation, with many choosing higher-tax but more fiscally stable states such as New York and California. The graduated-rate income tax can help us change that dynamic, bringing more businesses and jobs into our state.
By and large, opponents of the graduated tax have not outlined how they would stabilize our finances in an effort to keep future business leaders like myself here in Illinois. The scale of our financial challenges requires serious solutions that not just reduce expenditures but also raise significant amounts of new revenue.
In the absence of a graduated tax, will the state of Illinois need to raise the current flat income tax on all Illinoisians, instead of just the 3% who can afford to pay (and certainly those like Griffin who can dispassionately drop $46.75 million on an anti-tax campaign)? In the absence of a graduated tax, will the state of Illinois need to raise new property taxes on all Illinoisians? These are the difficult questions that opponents of the graduated tax find it easier to ignore than to confront.
After graduating from the University of Chicago, I’m excited to make Illinois my long-term home — but I know that the business case for Illinois is hindered by our state’s unstable finances. Yes, the graduated tax is asking the top 3% to give up a little bit more of their income, but those taxes are a critical investment in the future of Illinois’ businesses.
So let me be clear: opponents of the graduated-rate income tax in the business community do not represent the next generation of business leaders. And I hope that those inside and outside the business community join me this election season in proudly supporting the graduated tax — we need it to build stronger business foundations for our state’s future.
Asher Mayerson is a second-year MBA student at the University of Chicago’s Booth School of Business. He previously worked as a senior aide to Chicago Treasurer Kurt Summers and as a White House aide to President Barack Obama.
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