Behind the great tax push
Sunday, October 21, 2007
by Bob Secter
There's an old political maxim in Illinois that speaks volumes about why it's so hard to put governments on a diet.
"If you can't get a meal, at least take a sandwich," officials like to say as they cut deals with taxpayer money that can lead to bigger programs and payrolls and, sometimes, political fiefdoms.
But suddenly, it might seem, some of the state's most powerful political leaders have wearied of budget snacks and are headed for the all-you-can-eat buffet.
Eye-popping new budget plans from Mayor Richard Daley and Cook County Board President Todd Stroger ask taxpayers to pony up nearly $1.2 billion in new taxes and fees. Meanwhile, the CTA and other transit agencies are pushing for a regionwide one-quarter percent sales tax increase.
And this all follows Gov. Rod Blagojevich's failed attempt to raise $7 billion in business taxes.
Civic Federation president Laurence Msall calls it a "tsunami of tax increase proposals," but the question is, why is all this happening now?
The answer isn't simple or singular, but there is at least one common thread running through the recent tax hike frenzy that sounds flip in the telling. Political leaders are pushing big ticket increases partly because they can.
Little risk of election rejection
Stroger, Daley and Blagojevich are all in the first year of new terms, and any voter outrage the tax plans may stir has a long time to dissipate before the next election.
Defying conventional wisdom, Illinois voters historically have shown a reluctance to punish officials for backing tax hikes, according to Charles N. Wheeler III, a political expert at the Springfield campus of the University of Illinois.
Voters booted Republican Richard Ogilvie from the governor's office after he pushed through the state's first income tax in 1969. But Ogilvie seems an exception to the rule, and there were a lot of other reasons behind his re-election loss.
Former Republican Gov. James R. Thompson backed several big tax hikes, but was elected four times. Republican Jim Edgar was elected to succeed Thompson even though Edgar favored a permanent hike in the state income tax and his Democratic rival opposed it.
Indeed, voters in Illinois rarely oust incumbents for any reason. A recent study by Wheeler found that legislators who backed major tax hike bills in Springfield were returned to office more than 90 percent of the time.
Those numbers suggest Stroger and Daley, as well as commissioners and aldermen who back their tax measures, can do so with minimal political risk. "They pretty much have impunity," explained Wheeler.
'Tax everything that you can'
Daley's spending plan for next year would jump property taxes more than in his previous 18 years in office combined. Stroger wants to triple the county's share of the sales tax, bump up the gas tax and add more than 1,100 new jobs to a payroll that critics have long claimed is larded with cronies and inefficiency. Blagojevich's proposal to apply a gross receipts tax to most business transactions was so massive it collapsed under its own weight. It would have been used largely to bankroll new spending initiatives instead of fixing the state's chronic budget woes or making a big dent in a crushing multibillion dollar pension debt.
"There seems to be a general attitude to tax everything that you can," said Msall of the Civic Federation, a non-partisan government watchdog. "That's what these government officials think their role is, to oversee the expansion of government rather than the management of government."
Critics, and they are easy to find, say the tax proposals stand out both because of their titanic dimensions and because they are not in sync with any national trend.
"We are seeing tax cuts at the state and local level in a lot of other places, but not here in Illinois," said J. Thomas Johnson, president of the Taxpayers' Federation of Illinois.
In Johnson's view, bureaucratic tunnel vision is only contributing to an impression that taxpayers are being piled on, especially by the city and county.
"There seems to be no coordination of governments taxing the same people or prioritization of what's important," Johnson said. "Each government seems to be operating totally independent of each other even though they're asking for tax dollars from largely the same group of people."
Driving a hard bargain
In his budget address to the City Council earlier this month, Daley said that revenues from the sales, fuel, parking and cigarette taxes have been down and that the "dramatic slowdown" in the housing market has depressed real estate transaction tax revenues.
"The cost of government continues to rise faster than inflation and our tax base," he said. "The cost of personnel wages, pension and health care makes up over 80 percent of our city's budget and continues to grow." For emphasis, he repeated the same sentence.
Stroger makes a similar argument, saying county finances are hemmed in by declining federal Medicaid dollars as well as ever-increasing personnel costs largely driven by generous union contracts agreed to before he succeeded his ailing father, John Stroger, as board president last year.
But it was the Daley and John Stroger administrations which signed off on those deals. Just in August, Daley announced new 10-year labor agreements with 33 city worker unions that should guarantee labor peace through the 2016 Olympics that the city is bidding to host. The terms guarantee that city workers will continue to get very generous pensions and health-care coverage that is a bargain by standards of the private sector.
In previous contract negotiations, Daley has made a show of pressing for work rule changes that he said would reduce waste and save money. This time around, he soft-pedaled such talk.
So at a time when private scavengers make due with a lone crewman on garbage trucks and some suburbs operate with two, the city agreed to keep three-man crews. City trades employees for the next decade were guaranteed the coveted "prevailing wage" earned by counterparts in private industry (even though city workers are guaranteed the 40 hours of work a week that their private sector brethren are not) and other workers won raises of up to 4 percent a year.
"It seems at many times like there's only been one side at the negotiating table when it comes to labor contracts," Msall complained.
A family might delay the purchase of a new car or a new roof if money is tight, but Daley opposes such an approach when it comes to city government. He contends that the city would lose momentum if it interrupted its investment in infrastructure, and argues that delaying projects only means they would be more expensive to build later.
His new spending plan includes a $108 million property tax hike, which the mayor justified by saying the money was to needed to build new libraries and run the old ones.
When he was running for election to his first full term last November, Todd Stroger pledged not to raise county taxes for his first year in office.
"There was a lack of credibility to come in and ask for taxes when you first move in," Stroger told the Tribune editorial board last week. But Stroger's next budget will be his second. The pledge has been fulfilled and new revenue is now a must, he said.
Shooting for the moon?
It's hard to tell what the endgame of Stroger and Daley might be, but economist J. Fred Giertz said they could simply be shooting for the moon so the public will be more willing to accept scaled back versions of the tax plans.
On the other hand, Giertz, on the faculty at the Institute of Government and Public Affairs at the University of Illinois, said politicians inevitably get grief over tax hike plans whether they are modest or huge.
"The thinking could be, you don't want to cut your finger off a piece at a time, so you might as well take the whole chunk off," Giertz explained.