4 reasons House members should reject Pritzker’s progressive tax amendment
Caving to pressure from the governor would risk the well-being of Illinois.
Gov. J.B. Pritzker’s aggressive push to deliver on his progressive income tax campaign promise could prove disastrous for the state of Illinois.
While several Democratic lawmakers appear to have misgivings about both the constitutional amendment to change Illinois’ income tax structure and the proposed tax rates themselves, the May 31 deadline for the end of spring legislative session is looming, and they might be tempted to yield to pressure by progressive tax proponents.
As lawmakers weigh this proposal, it is critical that they understand the impact this policy would have on the state.
1) A bridge to higher taxes on the middle class
Scrapping the state’s constitutionally protected flat income tax will remove one of the few taxpayer protections in Illinois. By allowing the General Assembly to tax different segments of the population at different rates, or even the same dollar multiple times, it will be easier for lawmakers to raise taxes, one taxpayer subgroup at a time. Data from the nonpartisan Tax Foundation show the middle class often ends up the prime target for tax increases in progressive income tax states.
The middle class will likely be in the crosshairs for a tax hike if these proposals are approved because the revenue proponents claim the progressive tax will bring in is based on faulty assumptions, and actual revenues are likely to fall short. Furthermore, Pritzker has promised spending that would require a $3,500 tax hike on the typical family.
2) It will harm Illinois’ already-weak economy
Second, the progressive income tax hike will wreak havoc on Illinois’ already fragile economy. The expert literature on the subject of tax hikes is unanimous: Tax increases harm the economy. Experts ranging from Nobel Prize winners such as Edward Prescott, to former Obama Administration chair of the Council of Economic Advisors Christina Romer, to Congressional Budget Office Director Douglas Holtz-Eakin, to George W. Bush economic advisors Harvey Rosen and Greg Mankiw – whose textbooks are the most widely used in college macroeconomics classes – agree on the following: Higher taxes hurt economic growth, and higher marginal tax rates reduce small business employment, employee wages and firm growth.
The Tax Foundation estimates that the governor’s proposal would make Illinois the third worst business climate in the nation. The current proposals could cost the state more than 30,000 jobs and $11 billion in GDP. However, in order for the progressive income tax to pay for Pritzker’s spending promises, rates will have to be much higher and could cost the state up to 286,000 jobs and $43 billion in economic activity.
3) It doesn’t address high property taxes or constant budget deficits
Finally, the progressive income tax is not a solution to Illinois’ high property taxes or fiscal problems. While the proposals have been touted as a means to property tax relief, property taxes would still be allowed to rise, and the average growth in property taxes would wipe out any middle-class tax relief.
What’s more, on top of both higher income and property taxes, the progressive income tax at the proposed rates will fail to pay down Illinois’ massive unfunded pension liability, even if all additional revenue is dedicated to pensions.
4) In-district polling shows constituents don’t want a progressive income tax amendment
Pritzker has stated he is confident that he will get his prized progressive income tax amendment on the statewide ballot in November 2020.
However, polling shows this confidence may be unjustified. In many key legislative districts – where lawmakers have stated they are undecided on the progressive income tax proposal – the graduated income tax and Pritzker himself are underwater.
In recent days, further new polling shows strong opposition to Pritzker’s progressive income tax amendment in House District 116, held by newly appointed state Rep. Nathan Reitz, D-Steeleville. Just 22% of likely voters in his district favor Pritzker’s proposal to put a progressive income tax constitutional amendment on the ballot while 57% oppose it, including 44% who “strongly oppose” the measure. And by a more than 2-to-1 margin (41% less likely versus 18% more likely), voters are less likely to vote for a state representative who voted in favor of the governor’s proposed constitutional amendment. Independents are less likely by a wide, 26-point margin (summary memo, topline, crosstabs).
Lawmakers facing pressure to vote in favor of Pritzker’s progressive income tax should ask why.
The progressive income tax will lead to higher income and property taxes without any improvement in the state’s fiscal condition, while costing the state thousands of jobs and billions of dollars. Lawmakers are being asked to put their necks on the line so the governor can say he delivered on a campaign promise during his next election run. But doing so could mean that these lawmakers’ careers won’t survive that long.