In economics, there is a concept called the “Marginal Propensity to Consume” or “MPC”. MPC describes the relationship between income and consumption of goods (the spending of income) — or more specifically: how someone’s consumption (spending of income) changes when that person’s income changes.

A person’s MPC is calculated by determining the change in consumption divided by the change in income. For example: if someone’s income increases by $10, and they spend $8 of that $10, that person’s MPC is equivalent to 0.8.

Research has found that people with lower levels of disposable income have much higher MPCs. This means…

By Clara Fong, Fiscal Policy Intern & Allison Flanagan, Director of Policy Analysis

Since its creation in 2017, Opportunity Zones have been the source of controversy, with proponents believing it will narrow the geographical inequity gap across the country, while critics claim its main benefit is to wealthy investors. In this blog post, CTBA will provide an overview of what Opportunity Zones are, why they elicit controversy, and how some states are looking to decouple from the federal tax law.

What are Opportunity Zones?

Opportunity Zones, which were part of the 2017 Tax Cuts and Jobs Act, were designed by…

By Allison Flanagan, Director of Policy Analysis

Visualizations by Nicole Shen, Research Intern

Two weeks ago, Governor Pritzker proposed what CTBA would describe as a very sobering FY 2022 General Fund Budget. The short of why it was sobering is that the FY 2022 Proposed General Fund Budget increased year-to-year revenue through the elimination of $932 million in existing tax expenditures that benefit businesses, while also generating an additional $304 million in one-time revenue by proposing to prorate the Local Government Distributive Fund at 90 percent of its statutory value, and diverting some cigarette tax and gas-sales tax proceeds from…

By CTBA Staff

If nothing else, Governor Pritzker’s FY 2022 General Fund budget proposal was sobering. After acknowledging he had bolder plans for the state’s upcoming fiscal year, the Governor none-the-less proposed spending $28.7 billion on public services in FY 2022, essentially holding total service appropriations to the same nominal-dollar level they were in FY 2021. Of course, after adjusting for inflation, this means total spending on services in FY 2022 will be $868 million less in real terms than this year.

Being compelled to reduce the real investment Illinois state government makes in General Fund services is a legitimate…

By Allison Flanagan, Director of Policy Analysis

On Tuesday, December 15, 2020, Governor Pritzker announced $711 million in cuts to the Fiscal Year (“FY”) 2021 budget.[i] This is likely only the beginning of additional budget cuts that will be required. But with the first half of FY 2021 coming to an end, let’s analyze what this series of budget cuts could mean for the second half of FY 2021 and state spending priorities beyond.

In the November General Election, the Fair Tax amendment, which would have allowed Illinois to implement a graduated rate income tax structure, failed to pass. Illinois’…

By Allison Flanagan, Director of Policy Analysis

Plenty of research shows that changes in tax policy, like increasing tax rates on the wealthiest individuals in the state, do not cause a negative reaction in the economy, especially when those changes ensure the public sector has the capacity to make adequate investments in services that boost the economy. To adequately invest in core public services and infrastructure, tax policy needs to be right. …

By Allison Flanagan, Director of Policy Analysis

In May of this year, CTBA published a blog post about the impact the Fair Tax would have on Illinois small businesses. A few weeks ago, CTBA published another blog post about how the Fair Tax benefit small business farms in particular. As an addendum to both of these previous blog posts, this post dives a little deeper into all small businesses — which includes farm data — to better understand how the Fair Tax can help.

Everyone understands the important role small businesses play in the economy of our nation and of…

By Allison Flanagan, Director of Policy Analysis

On June 5, 2019, Governor Pritzker signed P.A. 101–0008 — often referred to as the “Fair Tax” — into law. This legislation will create a new, graduated rate income tax structure to replace the state’s current flat rate income tax.[i]. The Fair Tax legislation, shown in Figure 1, cannot go into effect unless, during the November 2020 General Election, voters ratify a proposed amendment to the Illinois Constitution that would eliminate the mandate that state income taxes be assessed using only one flat rate.[ii]

Prior research indicates that a graduated income tax structure…