A+ Illinois, the umbrella group for advocates of school finance reform, has not committed to a specific plan, figuring it would be better to line up support for the concept first. However, two group members have sketched possible tax reconfigurations. Here they are in nutshell.
ASSIGNMENT
Revise the state’s tax structure to:
Reduce the schools’ reliance on property taxes.
Boost minimum baseline spending by $1,000 per child.
Increase overall revenue to arrest what some see as a growing structural deficit.
SOLUTION
From the Chicago-based Center for Tax and Budget Accountability: Change the tax structure to generate an additional $6.7 billion in revenue:
Hike the state’s personal income tax from 3 percent to either 4.5 percent or 5 percent, generating $3.7 billion or $5 billion;
Include retirement income as personal income for seniors with adjusted gross incomes above either $75,000 or $100,000, raising $207 million to $359 million depending also on the new income tax rate;
Hike the state’s corporate income tax to either 7.2 percent or 8 percent (from the current 4.8 percent), generating either $442 million or $491 million;
Expand the sales tax to include all personal services, entertainment and possibly other consumer services, raising $580 million to $900 million;
Expand the sales tax to include food, generating $1 billion;
Eliminate tax expenditures, raising $500 million.
HOW THE $6.7 BILLION WOULD BE USED:
$2.4 billion to replace property tax savings, roughly 25 percent of property taxes currently going to education.
$1.8 billion to increase the minimum per-student spending level from $4,800 to $5,835.
$2.5 billion to eliminate a structural deficit in state education spending that the center says will deepen over time.
TAX RELIEF
Property tax reductions of at least 20 percent. “The amount of property tax relief would show up on every homeowner’s bill,” says center Executive Director Ralph Martire. “It’s completely transparent. Folks need to know this stuff.”
To counteract the regressive effect of a hike in the sales tax on low- to moderate-income people, the plan advocates refundable tax credits.
PROTECTIONS FOR SCHOOLS
To provide greater truth in budgeting, use the prior fiscal year’s spending as the base for the current year. “No more lottery shell games,” says Martire. “Whatever [amount] it was that went to schools in the prior year, you’ve got to start with that.”
That amount would then be adjusted by the employment cost index (ECI), not the consumer price index (CPI), because “it’s much more reflective of the labor and energy and healthcare costs, etc., that school districts have to pay,” he says.
ALTERNATIVE PLAN
Proposed by Cook County Assessor James Houlihan, this plan would raise $6 billion to provide tax relief and an extra $1.5 billion for education.
Raise state taxes by $4.5 billion to provide more property tax relief—25 percent of the total, not just 25 percent of the amount going to schools.
Hike the personal income tax rate to 4 percent from 3 percent and the corporate income tax rate to 6.4 percent from 4.8 percent.
Increase the personal income tax exemption to $6,000 from $2,000. Expand tax credits to the lowest earners.
Lower the sales tax to 4 percent from 5 percent while broadening it to include some services and eliminating a number of exemptions.