by Lyman Stone
April 28, 2014
A recent blog post by the Center on Budget and Policy Priorities (CBPP) suggests that adopting a constitutional amendment to allow a progressive tax in Illinois would benefit the state due to the state’s high and rising inequality and its chronic budget problems. While CBPP is correct that a state’s tax structure can have a powerful effect on quality of life and business activity, the economic evidence shows that low, neutral taxes on consumption typically have the least damaging impact on the economy, while high, progressive income and corporate taxes damage economic growth the most. But CBPP’s argument is somewhat different. They assert that higher income taxes don’t harm growth while simultaneously suggesting that taxes perhaps do affect inequality. In fact, inequality varies little between states, and states with highly progressive income taxes are actually associated with higher inequality.