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State Rep Says His Plan Would Balance Budget Without A Tax Hike

ilga.gov

Taxes are a major sticking point in the Illinois budget impasse. Legislative leaders say a tax hike is needed to balance the budget and provide needed services.  The governor says he’s open to a tax hike, but only if the Legislature passes business and political reforms.  A northern Illinois legislator says there’s a way to balance the budget without raising taxes.

State Representative Jack Frankshas a plan.  The Woodstock Democrat says, first, you get rid of what he calls corporate welfare, as enshrined in the current tax system.

“We have created a system of in the state of Illinois of crony capitalism, where we pick winners and losers to get special tax breaks.  We really have a 19th century tax code focused on that type of economy, instead of a 21st century economy,” he says.  

For example, Franks says, oil companies get $25 million a year because of offshore oil rigs they own elsewhere in the world, and newspapers get $32 million a year to buy ink.  Franks says Illinois’ antiquated collection system also costs the state many millions of dollars.

Franks says neighboring states have benefited from tax reforms. He says if Illinois followed the example of Indiana, it would save the state $90 million a year, and local governments another $57 million.    

"If we did it the way Wisconsin did, we’d save hundreds of millions more."

Franks says the net gain from all the tax reforms he’s proposed would total almost $3 billion. 

Northern Illinois University Professor KurtThurmaier is Founding Director of NIU’s School of Public & Global Affairs.  He says while he would need more details to assess Franks’ financial predictions, most experts would say he’s on the right track:

“Economists and fiscal policy specialists, public finance specialists really push the principle that [the] best, fairest tax system is one that has the fewest exceptions to the rules – people generally call those loopholes – and a broad base,” he says.

Thurmaier says that includes getting rid of many breaks for large corporations or whole industries. And in the 21st century economy Franks is talking about, that means taxing services, which are a much larger part of the economy now, as well as goods.

Next, Franks would improve the lottery.  Again, Franks, looks to other states as models. He says they do a much better job of getting a broader amount of people to play.

If we did what Georgia and Massachusetts did, we would bring in $1.2 billion more than we’re currently bringing in now.” 

Thirdly, he would cut wasteful spending. Cutting waste is a perennial political panacea that’s usually offered with few details. But Franks made it clear he’s not talking about trimming around the edges. He says he would do something in particular that would have a big impact:

I’d close the Department of Commerce and Economic Opportunity. That would save almost a billion dollars. It’s a boondoggle. It’s been replete with patronage for years. I think we should get rid of it and then create something new.”

Franks says the department is also used too often to distribute pork for political purposes, rather than economic ones.  

Thurmaier says the things Franks says about the department may be true...

“...but there are lots of good things that a department of commerce can do.  For example, helping our brick-and-mortar small businesses in terms of helping them with business plans and marketing plans. The small business development program, for example.”

Thurmaier says someone might argue about some of the department’s decisions, but that’s a more a political question than an economic one.

Franks says the problems with many of the state’s incentive programs is that, like the tax code, they benefit large companies with influence over small- and middle-sized ones.  He says broad-based relief without lobbyist-generated carve-outs would be better for the state’s economy, because those smaller companies generate more net jobs.

“And the easiest way to improve the economy is to increase jobs and productivity.”

And, he adds, a much better return on the state’s investment.

Thurmaier agrees.

“The research strongly indicates that giving tax breaks to individual corporations is great for corporations, [but] is not very good for general fiscal health of the state or the communities that give these breaks,”  he says.

The irony, according to Thurmaier, is that it’s clear companies place a higher value on other factors, such as location and access, over those incentives.  So it’s just a nice perk for the corporation’s bottom line.  It’s also a net loss for the state’s other taxpayers.

Franks says it’s terrifying that people are speaking of no state budget until sometime early next year.  He says he would recommend going ahead and crafting a two-year deal because the deadline to pass the next budget would be just a few months away.

Franks has no illusions as to his plan’s prospects. He says he knows there are entrenched interests who are against his proposals, and will fight them.  He just wants all ideas, including his, to be on the table.  

Guy Stephens produces news stories for the station, and coordinates our online events calendar, PSAs and Arts Calendar announcements. In each of these ways, Guy helps keep our listening community informed about what's going on, whether on a national or local level. Guy's degrees are in music, and he spent a number of years as a classical host on WNIU. In fact, after nearly 20 years with Northern Public Radio, the best description of his job may be "other duties as required."