J. Fred Giertz enlisted the help of a saint and a cartoon character to help illustrate his point during Thursday evening's Vandeveer Chair Lecture.
The economics professor from the University of Illinois used Saint Augustus and Homer Simpson to drive home his simple message: The governor's proposed gross receipts tax is not the way to fix the state's growing deficit.
"We can't expect a painless solution," he said about reversing the state's $3 billion deficit.
Unpaid bills for medical care, veterans and pensions are just a few of the state's programs that have gone unfunded as it struggles with the long-term budget shortfalls that began in 2001.
During that time, Illinois has also started many new programs. Most recently Gov. Rod Blagojevich proposed a form of universal health care and hefty increases for the state's elementary and secondary schools.
As a result, the surplus Illinois experienced in the late '90s has since been replaced with a growing deficit by borrowing and transferring money to cover the new costs.
"I would prefer that we solve our existing problems … then move onto new areas," Giertz said.
In March, Blagojevich proposed the largest tax increase in state history through the gross receipts tax, which he said would only target corporations and the services they provide. This would tax each transaction made to create a product. Currently, Illinois taxes goods through the sales tax, but not services.
Blagojevich said the tax would generate the $6 billion and $8 billion needed for his education, health care and property tax relief proposals.
Yet on a business side, Giertz said this tax would create a pyramid effect and would disproportionately hurt companies that manufacture complex items such as cars, compared to ones that need few steps to achieve the finished product. It may also encourage vertical integration.
Despite the governor's claims that this would not affect consumers, Giertz said tax increases always filter to the people, and this one, as will other Illinois' taxes, would overburden the state's low-income citizens.
"This is an inefficient tax because there are better ways to do it," he said.
Seven states have a gross receipts tax nationwide, but Illinois' proposed tax is far larger than any others, Giertz said. Until this proposal, he said Illinois was considered a moderate tax state.
The state's growing money troubles have put the state and the governor, who twice campaigned to not raise taxes, in a difficult situation. In fact, Giertz said this year is the first time in his 28 years in Illinois that there has ever been an energized and passionate debate about tax policy.
Giertz said the only ways to fix a deficit are to increase taxes or cut government programs. Since there is usually not enough political will to cut most programs, he said the only likely option is to raise taxes.
"You can't go on forever spending more than your revenue," he said.
The deficit problem has allowed other alternatives, including longstanding bills in the General Assembly, to get attention as well. Democratic powerhouses such as Speaker Michael Madigan and Majority Leader Barbara Flynn Currie in the Illinois House are listed as sponsors on the bill.
Giertz said this is a much better option, but it is unclear whether the bill would pass.
The best solution is one that is more modest than Blagojevich's proposal, which Giertz said is an overreaction and the deficit can be fixed with $3 billion, not $6 billion.
"When do you see an organization get a 20 to 30 percent increase in one year?" he said. "I think it would be very difficult to be able to digest this amount of money and turn it around for education."
Giertz said the state is hurting because a politician kept a campaign promise, but Illinois cannot continue without a tax increase.
He said the governor should moderately increase the individual and corporate income taxes as well as the sales tax, rather than a back-door tax that will hurt the consumer and the economy in the end.
andrea_zimmermann@dailyegyptian.com 536-3311 ext. 274
