To fund city and state services properly, there’s no dodging tax hikes

For most Chicago residents, quality of life is greatly impacted by the community in which they live. This in turn means every Chicagoan’s well-being in large part depends on the tax policies of both Illinois and Chicago being well-designed and capable of generating adequate revenue over time. While most folks don’t make the connection between taxes they pay and the quality of life they experience, the nexus between the two is undeniable. 

In fact, many public services and goods funded by the state and city, like education, roads, public safety, economic development, parks and libraries, generally benefit almost everyone. Others, like job training, child care assistance, affordable housing, domestic violence prevention and counseling, health care, and services that support senior citizens, low-income families, and those with physical disabilities or mental health concerns, focus direct benefits on smaller segments of the population. They provide indirect benefits to society by reducing crime, helping individuals stay employed and improving the overall quality of communities. 

Then there’s the need to respond to the inevitable public crisis that crops up. Since 2020, the nation has had to deal with a once-in-a-century pandemic that killed 1.1 million Americans through November and devastated large sectors of the economy. Fortunately for Illinois and Chicago, the feds bailed out state and local governments with billions.

The new crisis du jour in Chicago involves providing housing and other assistance to more than 22,600 migrants who have arrived over the last 15 months. The vast majority of these asylum seekers — also known as “people”— came to America to escape Venezuela’s politically repressive government and an economy in such poor shape that around half the population lives in poverty. 

Handling this challenge humanely and efficaciously requires a significant amount of public money — read that as “tax revenue”— estimated at north of $300 million per year. That’s money Chicago doesn’t have lying around. Indeed, after accounting for the $259 million the city earmarked for prepaying pension debt, Chicago’s rainy day fund will be down to $155 million. Which isn’t nearly enough to eliminate the $500 million-plus budget shortfall it’ll face next year. 

To date, Washington, D.C. hasn’t provided financial assistance for the migrant crisis like it did for COVID-19. Chicago caught a break when the Pritzker administration recently agreed to cough up an additional $160 million in state financial support.

But that support was only possible because Illinois’ General Fund is in the healthiest fiscal condition in decades — something that’s not expected to continue. That’s because state government — just like Chicago — has a tax system that fails to generate enough revenue growth to cover the cost of maintaining the same level of public services from one fiscal year into the next, much less handle whatever public crisis manifests. 

More revenue? A big ‘ask’

Sure, insufficient revenue growth could be mitigated by cutting spending on services, but the data indicate doing so would not be particularly good public policy.

Consider Illinois first. About 95% of all state General Fund spending on services goes to core areas of education, health care, human services and public safety, all of which help build better communities. Unfortunately, after adjusting for inflation, Illinois is spending about 10% less on those four services this year than it did in fiscal year 2000. This means continuing to cut those essential services is not in the public interest.

As for Chicago, among other fiscal stressors, the city is facing a significant shortage in sworn police officer positions, as well as unmet need for everything from affordable housing to mental health services. Indeed, Mayor Brandon Johnson is on record arguing the city should be investing around a billion dollars more annually in supporting traditionally underserved and marginalized people and communities. So, as with the state, cutting spending on core services funded by the city also isn’t in the public interest.

If cutting spending isn’t the answer, then raising taxes is. And that’s a significant challenge for one simple reason: Most people don’t like paying taxes. Yet, despite their antipathy for paying taxes, everyone demands, consumes and benefits from the public services and goods taxes fund. So if folks really want the state and city to invest in the core public services needed to build a decent quality of life for every person, whether rich, poor or in between — and have the capacity to handle public crises in a manner that minimizes human suffering — they have to support elected officials who are willing to raise the sustainable tax revenue to get the job done.

Ralph Martire is executive director of the Center for Tax and Budget Accountability and is the Arthur Rubloff Professor of Public Policy at Roosevelt University. 

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