Well-written Constitutions Matter
If you read much about taxes and spending in the state of Illinois, you know that the state’s in a world of hurt. The state government has dramatically underfunded its pension system for state government workers. Sometime in the next decade, the government will likely need to rein in state pensions, cut the growth of other spending to come up with funds to finance those pensions, or raise taxes.
I’m sure the state’s elected officials will consider all of those options in the future. But fortunately, there is one major barrier to raising taxes: the Illinois state Constitution.
This is from David R. Henderson, “Constitutions Matter for Tax Rates,” IPI, TaxBytes, January 25, 2023.
But that’s not the only advantage. The other major advantage is that it makes a legislature think twice, or at least once, before imposing higher tax rates. The legislators know that what’s sauce for the high-income goose is also sauce for the low-income gander. Most people don’t like having their taxes raised, but many people don’t object to having other people’s taxes raised. The requirement for a flat tax rate on individual and corporate income means that people who support raising taxes on others know that they will also end up being taxed more.
That’s where a constitution comes in awfully handy. Under the Illinois Constitution, all individuals must pay the same rate on their individual income and all corporations must pay the same rate on their corporate income.
Read the whole thing, which is short.
Capt. J Parker
Jan 26 2023 at 10:30am
Massachusetts had (past tense) the same “uniform tax” provision in its constitution until it was voted to be amended this past November. The key pieces of the campaign to get the amendment passed were:
1.) Call it a millionaires tax, someone else is paying it. (the tax is assessed on taxable income above one million dollars – amount not inflation indexed AFAK)
2.) Earmark the proceeds so that powerful voting blocks will perceive a personal benefit. Proceeds are to be used only on a) Public education – i.e. teachers union; or infrastructure repair and maintenance – other public sector unions. It remains to be seen if Public Education and Infrastructure mean, in the eyes of the legislature, paying lavish public sector employee pensions.
So, well worded constitutions matter. Well organized special interests matter too. The bar for amending the Massachusetts constitution is quite low. It has been amended 150 times. Maybe that is the main part that failed Massachusetts taxpayers.
Jan 26 2023 at 12:41pm
Good points, Capt. In case you missed it, I posted on Massachusetts in November.
Capt. J Parker
Jan 27 2023 at 9:04am
Yes, I did miss it, thank you for the link – I wish your arguments had been used by opponents of the Massachusetts bill during election season.
Jan 26 2023 at 2:54pm
Washington state is another place that has benefited from this provision, in this case with no state income tax at all.
Grand Rapids Mike
Jan 26 2023 at 9:34pm
Just an update, Illinois State Senators are discussing a vote to bring the graduated income tax back for a statewide vote to change the Illinois Constitution to allow it.
Thomas Lee Hutcheson
Jan 26 2023 at 10:28pm
I think it is just fine to tax higher income (even better their consumption) people at a higher rate than others. It is true that because we tax “income” with all sort f strange definitions and exemptions and decoctions, some high consumption people can escape paying taxes at all or a small percentages of their consumption.
The Illinois provision that corporations and individuals pay the same rates is particularly bad as business income should no be taxed at all.
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