Illinois Needs A Progressive Income Tax

Illinois needs to end its flat income tax and move to a progressive tax system. The goal should be to move away from tax bracket altogether, but at the moment the best solution is to have a series of brackets. The system of tax brackets is flawed because it relies on discontinuous jumps which always have the result of putting people in lose-lose situations. Make more money, jump up a bracket, end up paying more in taxes, and most of the benefits of a pay raise go away. Illinois can streamline the process with an algorithm that determines tax rates per individual based on a person's individual tax filing. This would create a continuous curve which would never penalize people for getting small raises that jump them to a higher tax bracket, costing them most of their raise.  This could be accomplished with a progressive or graduated tax system with brackets, having the individual rate corrected for in a person's annual tax return. One base rate for the lowest income is set and a second base rate for the highest income is set. A curve is fitted to the data for all incomes in Illinois, adjusted for deductions.  A second curve is fitted to everyone's tax state tax bill.  The second curve can then be smoothed into a continuous function. The deviation from each individual point then represents the amount owed back to the tax payer.  The important point to note here is that those who make more money must pay a larger portion of their income.  When everyone pays the same rate, you develop a regressive system due to local sales taxes.  People who tend to spend all their income will pay a greater amount due to local sales taxes.  People who do not spend all of their income or are able to live without spending all their income, then will pay a smaller percentage of their income in taxes.  Statistically speaking, those who make more, spend less on local taxes because they tend to invest or simply save a larger portion of their income. To be specific, those making less than $19,000 pay about 13.2% in state and local taxes, while those making over $500,000 pay about 4.6% of their income in state and local taxes.  A progressive income tax is one of many ways in which the state budget hole could easily be closed.

Reduce Our Property Taxes, Find New Revenue for Education

Minimum levels of education funding must be mandated by the state, with considerations for cost differences made to compensate for variable district costs, funding per pupil. Property tax rates have become over inflated due to Illinois over reliance on them for education funds. In order to reduce this burden Illinois must legalize and tax recreational cannabis to fund public schools in the footsteps of Colorado, Washington, Oregon, Nevada, and California. In order to receive these additional funds, communities must first meet minimum requirements of funding based on community income for the percentage of public schooling funds that must come from within the community. This number will based on the distribution of incomes from within specific communities. Cannabis tax funds will be allocated on a “fill in” basis, based on the level of funding a community is able to provide for themselves. This prevents high income communities from setting low funding levels to capitalize off cannabis tax dollars, and ensures that money gets to low income communities. Fixing a minimum to inflation and population ensures that school funding keeps pace with a growing student body.

Secure Our Future With Tuition Free Education

Tuition free college increases Illinois potential market capitalization which, in the long term, increases wages and therefore overall tax revenue. Tuition free college applies to Community Colleges, as well as four year institutions, which increases access to two year degrees, certificates, and vocation education. Community Colleges also offer a great stepping stone for individuals to move up to more expensive four year institutions. Why does that matter if tuition is free? Tuition free does not mean free. Colleges still charge fees, which even public schools do. Bus fees, computer resource fees, laboratory fees, and books can potentially amount to thousands of dollars a semester especially when coupled with indirect costs, like transportation, childcare during class time, or the need to relocate to attend school. Tax credits can help people to cope with these costs, but they do not give individuals more money than they earn.

Make LaSalle Street Pay

A 2/1000th of a percent tax on all financial market transactions.  Illinois is home to over 900 trillion dollars of financial transactions per year.  All things kept the same, this tax would be enough to fill Illinois budget hole by itself.  But wouldn't this discourage investment? Yes, yes it would.  But that is actually good for the small investor.  The vast majority of all financial transactions are performed by trading algorithms in a process called "high frequency trading." This practice of high frequency trading acts to undercut small traders, and this tax would be an incentive for big financial institutions to reduce this practice and would be a benefit to small investors because it would stabilize the financial market.  Large institutions would need to refine their algorithms to take less risk, ultimately benefiting the small investor who are otherwise subject to constant attempts by these institutions to undercut their profitable investments.  

Reduce the prison population, Reduce policing

This is a very straight forward process. Those in prison are a burden on tax payers, and America has the largest prison population in the world.  With legalizing Cannabis, and other illegal drugs, we have the opportunity to release many non-violent drug offenders.  Over half of Illinois prison population is non-violent offenders, giving us the opportunity to release a huge amount of people.  There is a huge swath of effects here.  We can reduce policing, saving money due to there being less crime to police. With a reduced prison population, we can consolidate prison locations, saving more money.  With less inmates, it obviously saves money on housing inmates.  With more people out of prison, you also expand the tax base. 

Putting it all together

It is clearly demonstrated that there is no budget problem here in the fifth wealthiest state in the country.  Why do we have a problem? Because we have the fifth most regressive tax system in the country. Our state has decided to finance itself on the back of middle class people, which is why there has been an exodus out of the state.  The solution is clear.  Taking profits off the black market and taxing them is step one.  Step two is the much more difficult fight, Making sure that everyone in the state is responsible for paying the same percentage of their income.