What will new taxes buy?

What did he know? When did he know it? Those Nixon-era phrases — emblematic of a chief executive enmeshed in questionable activity — are in vogue again, both in Washington and in Springfield.

In the nation's capital, of course, the issue is the degree of President Reagan's awareness of the foreign policy adventures of his top aides — the arms-for-hostages deal they tried to cut with Iran and the possibly illegal funneling of money to the contra forces attempting to overthrow the Nicaraguan government.

Closer to home, the same questions surfaced last month in the wake of Gov. James R. Thompson's call for $1 billion in new taxes, just a few months after seeming to rule out tax increases during the last gubernatorial campaign.

To bankroll the $22.1 billion budget he recommended for the fiscal year starting July 1, the governor proposed boosting the individual income tax rate to 3 percent from 2.5 percent and imposing the 5 percent state sales tax on computer software, over-the-counter medications, and a wide range of personal, repair, entertainment and business services. He also called for a 9.5-cent increase over five years in the current 13-cent-a-gallon motor fuel tax, a $17 hike in the current $48 annual license plate fee for cars and pickup trucks, and 30 percent increases in license fees for other trucks.

Thompson's tax proposals came under immediate fire, especially from Democrats who compared the Republican governor's budget plan to his campaign rhetoric. "This is the no-tax candidate of October and November telling us that we need $1 billion in new taxes this year," said House Speaker Michael J. Matligan (D-30, Chicago), who directed the House Revenue credibility."

Such criticism is not entirely underserved, for, although both the governor and his challenger, Adlai E. Stevenson III, agreed a modest hike in the gasoline tax might be warranted, Thompson throughout the campaign consistently downplayed the notion that a general tax increase might be in the offing.

True, no one has yet produced an in-context quote in which Thompson flat-out promises not to raise taxes, and it's doubtful anyone will, given the governor's lawyerly skill with the language. Still, it's not surprising that was the conclusion to which many Illinoisans jumped after hearing the governor rail against big spenders and repeat over and over he saw no need for higher taxes "at this time."

But to suggest, as some have, that Thompson's lack of forthrightness is grounds to reject on principle his tax package is faulty logic, for in a larger sense whether the governor recognized — should have recognized — clouds on the fiscal horizon is irrelevant to the issue.

Instead, the proper question now is simply whether tax increases are justified on their own merits, regardless of their origin. Assumptions about revenue growth and possible spending cuts are factors, but in the end the answer depends on one's vision of what Illinois is and what it should be.

Without new taxes, the governor said in his budget message, natural growth in general funds revenue — the workhorse accounts which pay for most day-to-day operations and big-ticket items like education and welfare — will be too paltry to allow much expansion in state programs. That assessment is hard to dispute, whoever's crystal ball is used.

At budget-time, Thompson's fiscal wizards estimated the existing tax structure would bring in about $217 million more in general funds next year, while legislative forecasters pegged growth at $369 million.

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Not all the new revenue will be available for program growth, however, because the first $69 million must come off the top to close the gap by which spending this year is projected to exceed revenues. Another $104 million of the new money is committed to paying off with interest the short-term borrowing used this year for cash flow purposes.

Thus, using the budget bureau's estimate, only $44 million would be available for program growth; the amount increases to just $196 million if the legislative forecast proves accurate. While those sums are gigantic by household standards, they represent relatively small slices of the state's $11.4 billion revenue base.

To put them into better perspective, consider this sample of spending pressures: the State Board of Education has proposed boosting school outlays by $335 million, including about $100 million to implement reform programs enacted two years ago; the higher education community is seeking another $131 million; union-negotiated pay raises for state workers could cost $90 million or more; costly, state-subsidized child care and medical coverage may be essential for single parents moving from welfare rolls to minimum-wage payrolls, and there have been calls for more direct-care mental health workers, child abuse investigators and prison guards. It can be argued, of course, that not all of these demands are worthy of being met in full. But to contend that without new revenues they can be addressed even minimally — for example by eliminating that ever elusive waste in government — is more difficult, if not impossible.

In addition, a number of other new initiatives have been passed by lawmakers and approved by the governor without accompanying revenue sources. Now, Thompson told legislators, the choice must be made between abolishing them or paying for them.

By proposing the tax package, the governor clearly has chosen to keep and pay for those new and expanded programs, as well as for education and welfare reform, better roads and local sewer improvements, and advancements in human services. And as he's suggest, that's the proper criteria for lawmkers and the public alike to evaluate the tax plan — what the dollars will buy, regardless of the governor's timing.

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