3 proposals in General Assembly could bring progressive income tax to Illinois

3 proposals in General Assembly could bring progressive income tax to Illinois

Scrapping Illinois' constitutionally protected flat income tax would remove one of the only pro-taxpayer policies the Land of Lincoln has left.

A trio of constitutional amendments that could result in Illinois enacting a progressive income tax is making its way through the General Assembly this legislative session.

As opposed to Illinois’ flat tax, where all earners are meant to pay an equal percentage of their income to the state, a progressive tax structure allows the state to set different tax rates for different incomes. In the Land of Lincoln, these proposals amount to little more than a Trojan horse for middle-class tax hikes.

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If any one of these amendments receives a supermajority vote in the House and Senate by May 6, voters would then be asked to approve or deny the measure at the ballot box in November. Constitutional amendments do not require the governor’s signature.

What’s on the table

Two of these proposals were originally filed in 2017, and are on their second reading in the Senate. After a third reading, the Senate may call them for a vote.

The first is Senate Joint Resolution Constitutional Amendment 1, filed by state Sen. Don Harmon, D-Oak Park. The second is Senate Joint Resolution Constitutional Amendment 16, filed by gubernatorial candidate and state Sen. Daniel Biss, D-Evanston.

If enacted, these amendments would scrap the section of the Illinois Constitution that guarantees a flat income tax in favor of a progressive, “graduated” income tax for both individuals and businesses. They would also remove a constitutional provision that ensures the corporate income tax rate cannot exceed the individual income tax rate by a ratio of 8 to 5.

The third proposal, House Joint Resolution Constitutional Amendment 39 was filed in the House Feb. 6 by state Rep. Christian Mitchell, D-Chicago. This amendment would scrap the flat income tax protection in the Illinois Constitution and provides that lawmakers “may” impose a progressive income tax.

The danger of a progressive income tax in Illinois

It’s important to keep in mind that none of these proposals actually contain the income tax rates Illinoisans will pay. Those rates are ultimately left up to state lawmakers, who in July 2017 passed the largest permanent income tax hike in state history – all to fund a budget that was still out of balance.

Democratic gubernatorial candidate Bob Daiber is one of the only political figures who has put forth a proposal detailing what those rates might be. He sold the plan as a tax hike on wealthy Illinoisans and a tax cut for the rest of the state that would generate an additional $1 billion.

This is what the tax rates look like for each income bracket under Daiber’s plan:

  • $2,500 to $24,999 – 1 percent
  • $25,000 to $44,999 – 2.25 percent
  • $45,000 to $149,999 – 3.75 percent
  • $150,000 to $999,999 – 4.95 percent
  • $1 million or greater – 6 percent

A deeper analysis of this proposal shows it would bring in $5 billion less than the state collected via the income tax in 2015. For a plan to generate what Daiber and other progressive tax proponents are seeking, Illinois would have to impose a progressive income tax structure that looks more like New York’s.

That means higher income taxes for nearly every Illinois taxpayer.

Here’s what New York’s income tax structure looks like:

Single filers

  • $0 to $8,500 – 4 percent
  • $8,501 to $11,700 – 4.5 percent
  • $11,701 to $13,900 – 5.25 percent
  • $13,901 to $21,400 – 5.9 percent
  • $21,401 to $80,650 – 6.45 percent
  • $80,651 to $215,400 – 6.65 percent
  • $215,401 to $1,077,550 – 6.85 percent
  • $1,077,550 or higher – 8.82 percent

Joint filers

  • $0 to $17,150 – 4 percent
  • $17,151 to $23,600 – 4.5 percent
  • $23,601 to $27,900 – 5.25 percent
  • $27,901 to $43,000 – 5.9 percent
  • $43,001 to $161,550 – 6.45 percent
  • $161,551 to $323,200 – 6.65 percent
  • $323,201 to $2,155,350 – 6.85 percent
  • $2,155,350 or higher – 8.82 percent

When progressive tax proposals such as Daiber’s fail to generate necessary revenue, income tax rates on the middle class are bound to go up, just as they have in New York.

What further tax hikes mean for Illinoisans

Enacting a progressive tax – and the tax hikes that will inevitably come with it – is the last thing Illinois politicians should be focusing on.

The 2011 temporary tax hikes cost Illinoisans 9,300 jobs and nearly $56 billion in economic activity. And the 2017 tax hike is expected to further harm the state’s sluggish economy.

Hiking taxes on already overburdened Illinoisans won’t just hurt the state’s economy, it will speed up the state’s outmigration crisis, which is already one of the worst in the nation. Illinois’ shrinking tax base makes it even more difficult to balance the budget.

Real solutions for the state’s budget crisis

When it comes to the state of the state, Illinoisans are starving for certainty.

But changing the Illinois Constitution to allow for a progressive income tax invites a great deal of uncertainty into the lives of Illinoisans. While families and businesses are planning for their futures, it is irresponsible for lawmakers to be calling for what amounts to a tax hike without saying how high that tax hike will be – or who exactly will pay more.

To offer more certainty and security to Illinois families, lawmakers should opt instead for a constitutional state spending cap, which ties growth in state spending to residents’ ability to pay.

From 2005-2015, state spending per capita grew 25 percent faster than per capita personal income in Illinois. Many communities saw an even greater disparity. In Rock Island County, for example, state spending per capita grew 70 percent faster than residents’ incomes over that time.

In a healthy economy, it’s OK for government spending to grow. But when spending growth outpaces economic growth, it forces policymakers to raise taxes or borrow money. State lawmakers have been eager to do both. And that breeds uncertainty about Illinois’ future.

Thankfully, state Sen. Tom Cullerton, D-Villa Park, and state Rep. Allen Skillicorn, R-East Dundee, have both filed constitutional amendments tying growth in state spending to growth in the state’s economy: SJRCA 21 and HJRCA 38.

Lawmakers would be wise to back this bipartisan proposal to get the state’s spending back on track, rather than pushing further tax hikes on struggling residents.

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