WBEZ | income taxes http://www.wbez.org/tags/income-taxes Latest from WBEZ Chicago Public Radio en New report shows Illinois' finances could go from bad to worse http://www.wbez.org/news/new-report-shows-illinois-finances-could-go-bad-worse-105715 <p><p>A new report projects Illinois&rsquo; state budget will go from bad to worse if legislators don&rsquo;t address some key issues. If things stay as they are, Illinois can expect to see more money devoted to rising pension costs and more bills go unpaid, according to a new report by The Civic Federation, a financial watchdog group.</p><p>The report says pension contributions are eating up money for other essential government programs and will go from $5 billion this fiscal year to $7 billion five years from now.</p><p>&ldquo;Illinois is in a horrible financial situation,&rdquo; said The Civic Federation&rsquo;s Laurence Msall. &ldquo;It is continuing to get worse and we&rsquo;re at the breaking point where core government services will not be able to be funded if we are going to maintain the existing pension structure.&rdquo;</p><p>Legislative leaders have not been able to agree on the best way to pay for state employees&rsquo; pensions. They have disagreed on everything from which plan is considered to save the most money, to the legality of certain proposals, since the state constitution says a pension cannot be &ldquo;diminished or impaired.&rdquo;</p><p>The Civic Federation&rsquo;s report says another factor why the state is expected to continue to struggle financially is the personal income tax rate. Gov. Quinn raised it from three percent to five percent two years ago, but the rate is scheduled to go down in 2015. Corporate taxes were also raised to seven percent. Those are also scheduled to be cut in 2015.</p><p>The decision to keep the income tax rate where it is or cut it is expected to be a big part of next year&rsquo;s governor&rsquo;s race.</p><p>&ldquo;We might not be able to make it to 2015 if the state doesn&rsquo;t address the pension crisis and reduce that $97 billion in unfunded liability,&rdquo; Msall said.</p><p>Msall&rsquo;s report also details the consequences of the state&rsquo;s financial problems. Illinois is expected to have a backlog of unpaid bills owed to vendors of $21.7 billion in five years if the pensions stay where they are and the tax rates are cut. The state has $7.8 billion in unpaid bills in fiscal year 2013.</p><p>Quinn is scheduled to give his budget address next week.</p></p> Mon, 25 Feb 2013 05:00:00 -0600 http://www.wbez.org/news/new-report-shows-illinois-finances-could-go-bad-worse-105715 Topinka says Illinois not prepared to handle second economic recession http://www.wbez.org/story/topinka-says-illinois-not-prepared-handle-second-economic-recession-92483 <img typeof="foaf:Image" src="http://llnw.wbez.org//story/photo/2011-September/2011-09-26/5374000191_0b0ca9b3f2.jpg" alt="" /><p><p>Illinois Comptroller Judy Baar Topinka said Monday the state is not prepared for a second economic recession.</p><p>The tax watchdog group Civic Federation projected Illinois would end the 2012 fiscal year $8.3 billion in debt. The projection comes despite the state government’s decision to enact steep budget cuts and raise taxes earlier this year. Topinka said Illinois has nothing to fall back on should the economy get worse.</p><p>“Illinois, because of bad choices in the past, has fared worse than most,” said Topinka at a luncheon Monday. “And it's probably among the least prepared to be able to deal with further economic downgrades.”</p><p>Topinka added that this year's income tax increase is not making as much money as expected. In January, the governor approved a 67 percent income tax increase to help cut the state's debt. Topinka said the increased tax revenues were projected to raise $500 billion, but that Illinois' high unemployment rate left the state $60 million short of that estimate.</p><p>“If people aren't hired they don't make money,” said Topinka. “If they don't make money they don't pay their taxes. If they don't pay their taxes, I have no money to pay bills. It just goes around in a big circle.”</p><p>In August, Illinois's unemployment was at 9.9 percent. The national average was 9.1 percent.</p></p> Mon, 26 Sep 2011 22:48:00 -0500 http://www.wbez.org/story/topinka-says-illinois-not-prepared-handle-second-economic-recession-92483 One of life's certainties, taxes, can take many (or fewer) forms, depending on the country http://www.wbez.org/episode-segments/2011-04-18/one-lifes-certainties-taxes-can-take-many-or-fewer-forms-depending-count <img typeof="foaf:Image" src="http://llnw.wbez.org//segment/photo/2011-April/2011-04-18/802441.jpg" alt="" /><p><p>Today is Tax Day in the U.S., and to cope with the complicated tax code and to maximize deductions, Americans are increasingly relying on third-party vendors like Turbo Tax to fill out forms. That’s not necessary in places like the U.K. and Denmark, where the government fills out forms for you. In Russia, citizens don’t have to file because the nation has a flat tax. <em>Worldview</em>'s Jerome McDonald spoke to&nbsp;David Stewart, a legal editor with the publication <a href="http://www.taxanalysts.com/" target="_blank">Tax Analysts</a>, who explained to the origins of the peculiar system used in the United States.</p><p><em><strong>History</strong></em></p><p>In 1862, the original incarnation of America's current tax system was created to pay for the Civil War. It was removed ten years later, but reinstated in some capacity in the 1890s. In 1895, however, the Supreme Court ruled it unconstitutional, and it was not until the 16th amendment, passed in 1913, that a model of the tax system we use today was created. It was set up with seven tax brackets, which ranged from 1 to 7 percent.</p><p style="margin: 0.6em 0px 1.2em; padding: 0px;">That our tax system was developed during a war is surprisingly not uncommon. Taxes are commonly increased during wars, Stewart says. For example, the 1800 tax in Britain was instilled to pay for the Napoleonic Wars:&nbsp;“It seems to always come up as a war tax, but remains after the war,” Stewart says.</p><p><em><strong>Tax systems around the world</strong></em></p><p>The United States system of self-reporting is fairly unique compared to other countries. In the United Kingdom, tax authorities essentially do everyone's taxes for them, which works well for wage-earners who don't have a lot of investment income. Stewart calls this a strong system "until it doesn't work," citing last year's debacle in Britain, when 1.4 million citizens owed 1,500 extra pounds because they hadn't been assigned the right tax bracket.&nbsp;</p><p>In Eastern Europe, most post-Soviet Union nations use a flat tax. Though this system sounds ideal, Stewart notes that it really works best in nations that have trouble collecting from their citizens. In contrast, France has no income tax withholding but expect their residents to keep enough money on hand to pay the past year in taxes in three lump sums, which bears resemblance to the United States self-employment tax.</p><p>One of the best examples of the damage a faulty tax system can do to a country's financial status are the recent financial woes of Greece, where the high rate of tax evasion directly contributed to their recent recession and subsequent bailout. "There was a certain level of corruption in the Greek tax administration," said Stewart. But there was also "a culture of tax evasion. Essentially, when you see that your neighbor is not paying taxes, you're much less likely to do so yourself."</p><p><em><strong>The United States System</strong></em></p><p style="margin: 0.6em 0px 1.2em; padding: 0px;">In the United States, citizens have become acclimated to receiving large refunds every year from taxes overpaid the previous year. For 2010, the average refund will be 3000 dollars; in Canada, 1500 Canadian dollars. Stewart noted that it is the "pecularity" of the United States system that has led to the American mindset that refunds are commonplace in the rest of the world.</p><p style="margin: 0.6em 0px 1.2em; padding: 0px;">The Senate Finance Committee has also recently explored how our sophisticated reporting requirements ultimately require many taxpayers to pay to file their taxes through systems such as TurboTax or H&amp;R Block. Despite this, the U.S. has a relatively high rate of compliance, and only 1 percent of taxpayers will face an audit in a given year. This is because, according to Stewart, "information is the biggest driver of tax compliance." By constrast, in the developing world, there is very little accountability, and tax evasion runs rampant.</p><p>The U.S. also has the second highest corporate tax rate in the world; however, the effective tax rate is much lower, due to adopted workarounds put in place by corporations. The Obama administration seems to have taken on corporate tax reform as a major initative, but Stewart says, "Whether they can get it passed is an open question. But the simple fact that they’re talking about it is a positive sign."</p><p>Is there an ideal tax system? Stewart was quick to note that, "There’s no tax system that anyone will ever say ‘I really want to be involved in that.’&nbsp;It is a fact of life in taxes that there will always be winners and losers."</p></p> Mon, 18 Apr 2011 16:45:00 -0500 http://www.wbez.org/episode-segments/2011-04-18/one-lifes-certainties-taxes-can-take-many-or-fewer-forms-depending-count Analysis: Why the 67% tax increase doesn't end Illinois' budget problem http://www.wbez.org/blog/best-game-town/analysis-why-67-tax-increase-doesnt-end-illinois-budget-problem <img typeof="foaf:Image" src="http://llnw.wbez.org//Capitol_Building_Full_View_0.jpg" alt="" /><p><p><img src="http://llnw.wbez.org/blog/insert-image/2011-January/2011-01-12/Budget Demonstrators_Getty_Scott Olson.JPG" title="" alt="" style="width: 496px; height: 326px;" /></p><p>These have not been easy times for Illinois bean counters and those who depend on them.&nbsp; An already weakened state balance sheet, like the pocketbooks of its already stretched citizens, was hard-hit by the recession.&nbsp; Ever since, the state has been caught in a cycle of rising costs, unpaid bills, public protests, and political gridlock.</p><p>That's why the Illinois Senate rocked the political world when it voted to raise the state's personal income tax rate from 3 percent to 5 percent early Wednesday morning.</p><p>The tax plan amounts to a 67 percent increase in individual income taxes, far more than the 33 percent increase Governor Pat Quinn proposed - and campaigned on - during much of 2010.&nbsp;</p><p>All told, the tax increase deal is expected to raise an estimated $6 billion in additional revenues for the state - an enormous windfall for state coffers and a big help to its operating budget.&nbsp;</p><p>But a closer look at the Illinois' fiscal condition suggests that these new tax revenues won't be enough to solve Illinois' mounting fiscal woes.</p><p>Why?&nbsp;</p><p>For starters, the revenue impact won't hit all at once; it will take time before the state reaps the benefits of the tax hikes.&nbsp; Meanwhile, the state still needs to pay unpaid bills.&nbsp;</p><p>In addition, by conservative estimates Illinois is facing a structural deficit of at least $13 billion.&nbsp; Most now say the number is closer to $15 billion.&nbsp; Using the smaller number, that roughly breaks down to the following:</p><p><strong>$4 billion = Owed to Pensions</strong></p><p><strong>$2 billion = Additional borrowing costs</strong></p><p><strong><u>$6 billion </u>= Unpaid bills (expected to reach $8 billion by July 2011)</strong></p><p><strong>$13 billion = Total (so far)</strong></p><p>That means that the additional $6 billion in state income tax revenues the General Assembly just mandated will cover <em>at most</em> half of the total deficit.</p><p>The vote to increase taxes was politically tough for many lawmakers. &nbsp;Not surprisingly, it came late at night, under the cover of darkness, and during the twilight of a lame-duck legislative session.&nbsp; In light of the serious fiscal problems facing Illinois, some public policy analysts praise the move as <a href="http://news.illinois.edu/news/09/1116budget.html">necessary</a> and courageous.&nbsp; Others say an already bloated government ducked the hard work of spending cuts, <a href="http://www.illinoispolicy.org/news/article.asp?ArticleSource=3613">hurt economic growth</a>, and stuck the taxpayers with the bill.</p><p>No matter how you see it, one thing is clear:&nbsp; the problems aren't going away with Wednesday's vote.&nbsp; Bills continue to mount - especially for pensions and health care.</p><p>That leaves the Governor and lawmakers in the new 97th session of the General Assembly with many more tough days ahead.&nbsp; Watch for Quinn to continue to push his $15 billion dollar loan consolidation plan and for others to keep the push alive for more casinos and gaming revenues.&nbsp; Why?&nbsp; Because the remaining options are limited - and painful. &nbsp; They include more dramatic pension reforms, more tax increases, and more cuts to services and programs.&nbsp;</p><p>And that's even after Illinoisians kick in 67 percent more come tax time than they did before.</p><p>&nbsp;</p><p>&nbsp;</p></p> Wed, 12 Jan 2011 22:29:00 -0600 http://www.wbez.org/blog/best-game-town/analysis-why-67-tax-increase-doesnt-end-illinois-budget-problem Moseley Braun avoids talking about personal finances http://www.wbez.org/story/carol-moseley-braun/moseley-braun-avoids-talking-about-personal-finances <img typeof="foaf:Image" src="http://llnw.wbez.org//IMG_6719.JPG" alt="" /><p><p>Chicago mayoral hopeful Carol Moseley Braun is continuing to avoid questions about her finances. The former U.S. Senator testily told reporters she's already said what she has to say about her personal finances.</p><p>&quot;You've got the returns,&quot;&nbsp;she said. &quot;You know, there's no more drilling down on this.&quot;</p><p>This week, Moseley Braun made public the first two pages of her federal income taxes dating back to 2006. In talking with reporters, she referred to a statement issued earlier this week which said she's in a fight to keep her small organic foods business up and running.</p><p>Her tax returns show she has had a negative income of hundreds of thousands of dollars over recent years. But because she didn't make public attachments that go along with her taxes, it's not clear how Moseley Braun is getting by. When a reporter asked a follow-up question related to her finances, a campaign aide interrupted.</p><p>&quot;OK. Thank you,&quot; the aide said.</p><p>&quot;No, no. We're not done yet,&quot;&nbsp;the reporter said.</p><p>The aide said, &quot;No. I'm done. And she's done.&quot;</p><p>The three other major candidates running for Chicago mayor, Gery Chico, Miguel Del Valle and Rahm Emanuel, have made their personal finances public.<br />&nbsp;</p></p> Fri, 07 Jan 2011 18:36:00 -0600 http://www.wbez.org/story/carol-moseley-braun/moseley-braun-avoids-talking-about-personal-finances Moseley Braun defends tax returns http://www.wbez.org/story/carol-moseley-braun/moseley-braun-defends-tax-returns <img typeof="foaf:Image" src="http://llnw.wbez.org//IMG_6701.JPG" alt="" /><p><p>Carol Moseley Braun is defending her tax returns. The candidate for Chicago mayor publicly released the first two pages of her federal income taxes from the previous two years Tuesday. The returns showed she lost more money than she took in and hadn't paid any federal taxes. Moseley Braun says the small organic foods business she's been managing since she was a U.S. senator is doing OK.</p><p>&quot;We did fine. I struggled. I didn't fire anybody. I didn't lay people off. I did the best I could and I made that little business work and it's still working,&quot; she said.</p><p>Braun's returns show she reported a taxable income of less than $16,000 in 2009.</p><p>Other major candidates for mayor have also released their financial records. Rahm Emanuel and Gery Chico made millions in recent years while Miguel Del Valle has mostly been living off his salary from his position as Chicago City Clerk.</p></p> Wed, 05 Jan 2011 20:00:00 -0600 http://www.wbez.org/story/carol-moseley-braun/moseley-braun-defends-tax-returns