Bruce Rauner, the Republican candidate for Governor of Illinois, recently released his Jobs and Growth blueprint, which includes his tax plan. Here is a look at his major tax proposals and current stance on the minimum wage.
Income Tax. Rauner would reduce Illinois’s current 5% income tax rate to its previous level of 3% over four years. This would cost the state $8 billion in annual revenue. Were Rauner to follow through on this pledge, he would have to find a corresponding amount in spending savings. Rauner provides no information about what programs he would cut or by how much.
Eight billion dollars is a lot of money. It’s more than the state’s general funds spending on health care ($7 billion), K-12 education ($6.7 billion), human services ($3.2 billion), higher education ($2.5 billion), public safety including prisons ($1.6 billion), or seniors ($1 billion). But Rauner does not say anything either about specific cuts or about priorities for cuts that would be needed to achieve this magnitude of savings.
Sales Tax. Rauner proposes to raise $600 million by increasing the number of services that would be subject to the sales tax. This $600 million would make up less than 10% of the $8 billion revenue loss from his income tax proposal. Thus Rauner’s overall plan is a massive cut to revenue that will trigger unspecified massive spending cuts.
As to the merits of Rauner’s proposal, we agree that Illinois should tax more services, and we support this part of his plan. Rauner would exempt “day-to-day” services such as day care centers, laundromats, barber shops, and animal care. Services he would tax include attorneys, printing, and travel agents. We may have some differences with Rauner as to which categories of services should be taxed or exempted, but we do strongly agree in principle with him that consumer services generally should be subject to the sales tax. We also credit Rauner for the specificity of this part of his plan, which details which services would be taxed and which would be exempt.
Property Tax Freeze. We agree with Rauner that Illinois has become far too dependent on local property taxes. Our biggest concern is the inequity in school funding that has resulted. However, we oppose a complete freeze on property taxes as Rauner has proposed because it generally hinders localities’ abilities to raise needed funds and forces localities to turn to regressive sources of income like sales taxes and fees. Freezing property taxes also can create severe distortions in housing markets.
Minimum Wage. Rauner got himself into trouble during the primary campaign when, while playing to conservative audiences, he announced his support for reducing Illinois’s minimum wage from $8.25 to the federal minimum wage of $7.25. This proved to be a highly unpopular position, especially coming from a billionaire.
In his new plan, Rauner says he supports raising the minimum wage “gradually.” He does not say how much he would he raise it, or how gradually.
Rauner also makes his support for an increase in the minimum wage contingent on the adoption of business-friendly reforms of workers compensation and tort claims. This conditional support for raising the minimum wage increases the difficulty of passing it. There are difficult political problems with each of the reforms he champions that, in addition to the political issues around the minimum wage, multiply the obstacles to any of it actually happening.
The bottom line, then, is that the Rauner tax plan would produce welcome changes to the sales tax, but as a whole would result in a massive cut in state revenue that would require an equally massive cut in spending on education, health care, human services, and public safety. Rauner offers no specifics on what programs he would cut. And he offers support for an unspecified increase in the minimum wage contingent on controversial business reforms.