Daily Debunk: Women, minorities gain, not lose, in Fair Tax
Graduated income tax repairs decades of inequities; anything else is just scare tactics
Nurses on strike last month at UI Health in Chicago: you go ahead and try to tell them how much worse things would be for them under a progressive income tax. (Facebook/Renita Clark)
By Ted Cox
Opponents of the Fair Tax Amendment are charging that women and minority workers would be hurt if the Fair Tax Amendment passes, but they might want to just shut up and listen to those groups themselves.
Those fighting the Illinois tax reform are citing a study released in August by the Berkeley Research Group called “Illinois’s Proposed Graduated Income Tax: Impacting Jobs and the Economy.” It suggests that hospitals, restaurants, and individual and family services are three sectors of the economy “that our economic model indicates will be hardest hit by the tax increase,” and “women and minorities are likely to be disproportionately affected by the job losses” because they’re heavily employed in those fields. The Chicago Tribune based an August editorial on its findings.
Yet this is something we tend to file under “nightmare scenarios,” in that it’s not really based on facts, but instead on speculation and scare tactics about the possible impacts of certain government policies — in this case, what Gov. Pritzker has called the Fair Tax, raising tax rates on the top 3 percent of taxpayers making more than $250,000.
How is that going to affect women, African Americans, Hispanics, and Asian Americans in those industries? Well, it’s sure as sensible shoes that it’s not because they’re surpassing $250,000 a year in salary, as none of those fields is known for paying workers in the trenches particularly well.
No, instead it’s a variation on the old “trickle down” argument, only reversed so the immense “pain” felt by business owners will trickle down to workers in the form of layoffs.
First things first, as AARP Illinois stated recently in another of our Daily Debunks: “A small business does not pay income tax in Illinois. Instead, the income tax is paid by the small-business owner who will be paying the same new graduated tax rates as all other Illinois taxpayers. Under the graduated income tax, tax rates would only be higher for those with incomes over $250,000. Those making less than $250,000 will see no increase in their state income taxes, and some will see a small decrease.”
Allow us to speculate that a restaurant owner faced with the calamity of clearing $250,000 in a year might benefit from actually hiring an extra worker or two to remain in the lower tax bracket. Understand, it might not necessarily balance out for the company accountant, but it will ease the “pain” felt from moving into that slightly higher tax bracket (up from the current 4.95 percent flat tax rate to 7.75 percent for those making up to $500,000).
About the same time that Tribune editorial ran, top leaders from the League of Women Voters Illinois, Planned Parenthood of Illinois, the Illinois National Organization for Women, Mujeres Latinas en Accion, Women’s March Chicago, and Women Employed joined in a teleconference celebrating a century of women having the right to vote — and, not coincidentally, to call on women of all races to approve the Fair Tax Amendment this fall.
Jennifer Welch, president of Planned Parenthood of Illinois, said the additional revenue raised by a progressive income tax would serve to adequately programs important to women, especially women’s health, after they had been historically “underfunded” for decades.
Cherita Ellens, president of Illinois Women Employed, said the group had just marked Black Women’s Equal Pay Day, meant to indicate that African American women have to work on average seven and a half months extra to earn what a White man makes in a year, and she cited that the wealth of a White family is on average 10 times greater than that of the average African American family, seven times greater than the average Hispanic family.
“The Fair Tax Amendment will be an important tool in helping to close the gap,” she said. “The process of progress is not a straight line, but it is an ongoing active fight that hopefully we’re all engaged in, and the Fair Tax Amendment is part of that fight for progress.”
Maria Gonzalez, of Mujeres Latinas en Accion, said a graduated income tax in Illinois would “greatly benefit Latinas and their households.”
What are these groups — who actually experience the disparities brought on by a regressive tax system — basing their beliefs upon? Not nightmare scenarios of what could possibly happen in the future, but the hard facts about the present and the historical damage done over decades by a flat income tax.
The study “Illinois’s Flat Tax Exacerbates Income Inequality and Racial Wealth Gaps” was released last month by the Institute on Taxation and Economic Policy, a national nonprofit, nonpartisan think tank that works on state and federal tax policy, and It states up front: “Tax laws that collect higher shares of taxpayer income from those with lower incomes exacerbate income inequality. In Illinois today, after state and local taxes, a family making less than $21,800 has 85.3 percent of their income remaining post-taxes while a family with more than $537,400 has 92.6 percent of theirs. Tax laws that perpetuate these inequities year after year make it even harder for families already struggling to get by with low, stagnating wages.”
The study compares the last 20 years, side by side, over how fair the tax system was, and how fair it might have been if the Pritzker Fair Tax had been in effect. It finds, in no uncertain terms, that “Black and Hispanic Illinois taxpayers with taxable incomes less than $250,000 pay $4 billion more in taxes over the 20-year period studied under a flat tax than they would under the Fair Tax. These tax differences reduced the standard of living for these families and exacerbated income and wealth gaps, while enabling the wealthiest Illinoisans to accumulate an additional $7.5 billion in wealth due to these tax subsidies.”
The regressive flat tax, in short, “amounts to a tax subsidy for the wealthiest Illinoisans that compounds income inequality and racial wealth gaps.”
Allow us also to point out that the Berkeley Research Group, which executed that nightmare study the Trib Edit Board cited, was specifically called out in Charles Ferguson’s book “Predator Nation” for “helping companies avoid or influence legislation, public debate, regulation, prosecution, class-action lawsuits, antitrust judgments, and taxes.”
So, to address anti-taxers directly: you go ahead and try to frighten African American and Hispanic and Asian American waitresses and nurses and other low-wage workers with how terrible a progressive income tax might be going forward, when they already know how destructive a regressive flat tax has been over the last 20 years and beyond because they’ve lived it and experienced it for themselves.