Reeder: Don't be fooled – any tax increase means an expansion of government

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SPRINGFIELD  – In the 25 years I’ve covered government, I’ve seen plenty of tax increases sold to the voters. They’re always in support of something noble: education, breast cancer research, economic development, law enforcement, libraries.

The problem with selling tax hikes this way is something called: “fungibility.”

That’s a fancy accounting term for money being interchangeable.

When I was a kid, I listened to disgruntled adults talk about money from the new state lottery being “stolen” from schools.

Legislators sold the lottery to voters on the premise that the money generated by this voluntary tax would go toward education.

In reality, the money simply replaced tax dollars that legislators would have spent on education, but instead spend on other projects.

When Rod Blagojevich was governor, he and lawmakers did a “fund sweep” that siphoned money in special funds and allowed it to be used for whatever purposes the politicians pleased.

That’s how money taxpayers had designated for breast cancer research through the tax form “check off” program ended up being spent elsewhere.

In government, no designated use for a particular revenue stream remains forever sacred.

We can grumble about this fact or just acknowledge that’s the way it is.

Over the past couple of decades, I listened to countless ordinary citizens – as well as more than a few elected officials – talk about being deceived when they supported a tax or rate increase but saw the money going elsewhere.

The concept of fungibility of funds remained elusive to them.

Imagine a giant bucket labeled “government” and a group of people standing around it ladling in money and saying in loud voices: “This is for education.” “This is for health care.” “This is for police.”

And now imagine a different group of people coming back to that same bucket four years later and ladling out money and announcing how they will spend it: “This is for pensions.” “This is for pay raises.” “This is for prisons.”

The only thing assured in such a scenario is that people will put money into the bucket and people will take it out. What changes over time is allocation.

For instance, last year Illinois lawmakers jacked up the state income tax by 67 percent.

Shortly after the income tax hike was approved by Illinois lawmakers, Gov. Pat Quinn said: "We have some temporary tax increases that are designed to pay our bills, get Illinois back on fiscal sound footing, and make sure that our state has a strong economy."

Virtually all of the new revenues went toward employee pensions, which the governor didn’t even mention.

“In fairness, maybe a little bit went to pay bills,” said Rep. Dwight Kay, R-Glen Carbon. “But this was about funding pensions – and it was being proposed by the same people who let Blagojevich skip paying the pensions.”

When a tax or fee is raised, it essentially is funding the overall size of government – not necessarily a particular program. When evaluating the merits of a tax increase, it’s best to first ask the question of whether you believe government should be expanded.

If you can’t say “yes” to that question, it's best to say “no” to the tax increase, no matter how noble the alleged reason for it.

• Scott Reeder is a veteran Illinois statehouse reporter and the journalist in residence at the Illinois Policy Institute. He can be reached at sreeder@illinoispolicy.org.

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