Our Solution

With a state budget deficit of $11.5 billion and growing, and a struggling national economy, Illinois needs - now more than ever - a revenue system that works. But Illinois’ current revenue system is both unfair and inadequate - working families bear too heavy a burden of state and local taxes, and the amount of revenue generated is not enough to support the programs and services we all depend on. Read more about Illinois’ current tax system here.

Illinois needs a lasting, sustainable source of new revenue that works for Illinois’ families by generating enough revenue to address the state’s deficit - strengthening the state’s economy and protecting vital services - while ensuring tax fairness for low and moderate-income families.

The Campaign for Illinois’ Future believes that the key to any revenue package is making sure it generates sufficient revenue to resolve Illinois’ budget deficit while also prioritizing fairness. Ensuring tax fairness is not only the right away to address growing inequality in our current system, it is also a more economically sound approach to addressing our state’s budget crisis.

Increasing taxes on higher-income families stimulates the economy while increasing taxes on low-income families weakens it:

Tax increases for higher-income families - those who tend to spend only a fraction of their income and save more - will generally result in them saving less while consuming the same amount. Even if spending is marginally reduced, there won’t be an equivalent loss for the state economy. Budget cuts, on the other hand, result in a dollar-for-dollar loss for the state.

Increasing taxes on lower-income families will generally result in reduced consumption because these families typically don’t earn enough to save - for many families, less money coming in means less money going out and less spending to stimulate the economy.

There are immediate measures Illinois can adopt that will ensure fairness for low and moderate-income taxpayers and help to rebuild our economy when paired with an increase in the state’s income tax. Such measures include:

The creation of a child tax credit;
Expansion of the Earned Income Tax Credit; and
An increase in the standard exemptions.

Each of these measures would immediately ensure tax fairness for Illinois’ working families and combat inequalities in our current system. In fact, if reform measures are balanced effectively, Illinois’ working families may actually pay less in taxes than they do now.

Revenue and Economic Recovery for Illinois

The evidence is clear - the impact of cutting state spending in an economic crisis is more harmful to a state’s economy than raising income taxes. As Illinois lawmakers address our current crisis and prepare for true economic recovery, they must recognize the importance of tax increases in maintaining state spending and the potentially devastating impact of budget cuts.

As Nobel-prize winning economist Jospeh Stiglitz points out in a March 2008 letter to New York Governor David Patterson:

In a recession, increasing or maintaining current levels of household, business, and governmental spending “keeps people employed and buying things,” and keeps businesses working to meet consumer demand.

Budget cuts reduce the total level of spending within a state’s economy - making the recession and resulting job loss worse. Every dollar of state spending goes directly back into the state economy right away so increases in state spending actually stimulate the economy while cuts weaken it.

Cuts run directly counter to the goals behind the recently enacted federal stimulus bill. Raising taxes while ensuring tax fairness is what will stimulate the Illinois economy and put us on a path toward economic recovery. Closing the budget gap in Illinois by cutting $11.5 billion in spending would result in more than 128,000 additional lost jobs. Illinois’ economy cannot afford this or the other damaging effects of deep budget cuts.

Every dollar of new revenue that Illinois invests in state programs and vital public services not only protects Illinois working families, it strengthens our economy by creating jobs, reducing unemployment and stimulating our economy to bring us closer to an end to this recession. That is why the Campaign for Illinois’ Future is urging Illinois legislators to pass a budget protects vital jobs and public services for working families while stimulating the economy.