By David Stanczak
Taxes are unique in one respect: they are a legal involuntary payment of money. Every other legal payment is voluntary. You give to charity voluntarily; whenever you buy something at the store, you agree to pay for it; your house or car payment is made because you agreed to pay whoever loaned you the money to buy it; if you rent your living quarters, you signed a lease whereby you agreed to pay rent to stay there. But you don’t voluntarily agree to pay taxes. If you buy something, tax is added into the price.; if you own your house, twice a year you pay the County Collector because she makes you an offer you can’t refuse: pay the tax or I’ll take your home; your paycheck arrives sans income tax. The coercive nature of taxation makes it unique. No other person or entity that you pay money to has the authority, without court order, to take part of your paycheck, padlock your business, seize your bank account, and put a lien on all the property you own.
The coercive nature of taxation is ameliorated by our form of government. As a republic, we empower legislative officials at all levels of government to impose taxes on us. We thus are imposing taxes on ourselves. The taxes are not a method of robbing Peter and Paul because they have in effect consented to the taxation.
The Illinois Constitution says that, when it comes to taxation of income, we must all have skin in the game. Peter and Paul get taxed at the same rate. That doesn’t mean they pay the same amount of tax. If Peter’s income is three times Paul’s income, Peter will pay three times Paul’s tax.
Gov. Pritzker is proposing putting on the 2020 ballot an amendment to the Illinois Constitution to allow a graduated income tax to be imposed. As applied to Peter and Paul, under a graduated income tax, if Peter’s income is three times Paul’s income, Peter may pay three times Paul’s tax, or five times, or ten times. The actual amount will be determined, not by the voters, but by the General Assembly after approval of the referendum. Under Pritzker’s graduated income tax proposal, 97% of the citizens would pay the same or less tax than they do now. Any increase will be borne by the top 3% of taxpayers.
The numbers proposed are cause for skepticism. To begin with, if Illinois could cure its budget woes simply by raising the rates on just 3% of the taxpayers, that 3% must be making a LOT of money. But if just 3% could generate all that money, why not include the other 97% in the increase? Think of all the money we could generate! The answer is simple: the taxpayers are disgusted because, even after the last massive (essentially 40%) tax increase, we’re no closer to paying our bills or making a dent in our pension obligations. They are unlikely to stand for another increase. So, Pritzker structures the proposal so that 97% of taxpayers can be told they won’t see an increase; this is calculated to persuade most voters to support the proposition. Why not? It’s not going to cost them anything. Somebody else (the richest 3%) is going to have to pay for it all. The 3% can vote against the referendum, but they will probably be easily outvoted by the others, who having no skin in the game, are willing to force the 3% to cough up the extra money. This is buying votes with other people’s money. This is robbing Peter to pay Paul.
There are two possible justifications for taking Peter’s money at a higher rate than Paul’s. The first is that, since Peter has more, he should pay more. But he already does. The same rate of tax generates more money from higher incomes. The other justification is that Peter ought to pay his “fair share” of the taxes. But there is no standard by which fairness is to be judged. The tax rate debate will devolve into the exchange between Clark Griswold and the desert auto mechanic: “How much to fix the car?” “How much you got?”
A graduated income tax lacks a rationale other than greed: the temptation to take someone else’s money just because he has it. This justification has no logical limit, and states which have indulged in tax the rich schemes lose the rich they are taxing, leaving the not-so-rich to pick up the tab.
This is David Stanczak on WJBC’s Voices.
David Stanczak, a WJBC commentator since 1995, came to Bloomington in 1971. He served as the City of Bloomington’s first full-time legal counsel for over 18 years, before entering private practice. He is currently employed by the Snyder Companies and continues to reside in Bloomington with his family.
The opinions expressed within WJBC’s Voices are solely those of the Voices’ author, and are not necessarily those of WJBC or Cumulus Media, Inc.