May 4, 2016

ITEP Statement on Illinois Department of Revenue Analysis of House Bill 689

news release

For Immediate Release: May 4, 2016  

Contact: Jenice R. Robinson, 202.299.1066 X29, [email protected]

Earlier today, the Illinois Department of Revenue (ILDOR) released an economic analysis of the tax changes included in House Bill 689, which would transform the state’s personal income tax from its current flat rate to a graduated-rate system. The following is a statement by Matthew Gardner, the executive director of the Institute on Taxation and Economic Policy, on the ILDOR analysis.

“The Illinois Department of Revenue’s analysis of House Bill 689 is fatally flawed for one simple reason: it assumes that the $1.76 billion in new personal income tax revenue that would be raised under HB689 cannot help to fund any government services. The DOR analysis notes that because this $1.76 billion would be ‘insufficient to balance the state budget, much less allow for additional spending… the logic of an increase of government spending offsetting the negative effects of a tax increase, does not apply.’

“This argument is absurd. When lawmakers make the difficult decision to raise new tax revenues, those revenues are always used to shore up public investments. Whether it’s to reinforce education spending, build roads, or provide better health care, these investments have a lasting, positive effect on the quality of life of Illinois citizens and the infrastructure on which the state’s businesses rely.

“If any member of the state legislature took a $20 bill out of their wallet and set fire to it, they would obviously be worse off for having done so. On a much larger scale, this is essentially what the Department of Revenue’s analysis is asserting would be done with the $1.76 billion raised under HB 689. 

“Dynamic revenue analysis is notoriously difficult—and notoriously manipulable. The hallmark of a sensible dynamic analysis is that it acknowledges the positive economic effects of public investments. By this standard, the DOR’s analysis fails utterly.”