A progressive tax could cost Illinoisans an estimated 34,500 jobs and cost the state economy $5.5 billion in just the first year after it’s enacted, according to new research released today by the Illinois Policy Institute.

Progressive tax proponents, such as Democratic gubernatorial nominee J.B. Pritzker, have gone so far as to campaign on the issue as part of the 2018 elections. Supporters will also be pledging their agreement during a noon rally at the Thompson Center.

But the Institute’s report, “False promises, real harm: Why Illinoisans should reject a progressive income tax,” shows that a progressive income tax would mean a tax hike for a vast majority of Illinoisans and harm the state’s economy, while having no meaningful effect on income inequality. The report analyzes the outcomes of progressive income tax states across the country, and then breaks down the projected effects of Chicago Democratic state Rep. Robert Martwick’s so-called “FRIENDLY Act,” a progressive tax proposal on the table in Springfield.

Quote from Chief Economist Orphe Divounguy:
“Illinoisans simply cannot afford this progressive tax. Families can’t afford it and neither can businesses. Proponents of the progressive tax claim it would reduce income equality and help put Illinois on a better financial path forward, but the facts prove otherwise. In Illinois, a progressive income tax would mean a tax hike on most Illinoisans and deal a serious blow to our state’s economy at a time when we can least afford it.

“Our state doesn’t need tax hikes – it needs to limit government spending to what taxpayers can afford, and it needs to lower taxes to encourage business investment and more job creation.”

Highlights from the report:

•  A progressive income tax could cost Illinoisans an estimated 34,500 jobs and could cost the state economy $5.5 billion in the first year after enacted.
• The progressive income tax proposal introduced by state Rep. Robert Martwick, D-Chicago, would constitute a tax hike for individuals earning as little as $17,300.
• In exchange for inflicting harm on all income groups, the progressive tax would do very little to reduce income inequality: Martwick’s plan might only reduce the income gap between those making less than $50,000 and those making more than $500,000 by 0.8 percent.
• States with progressive income taxes see greater income inequality. And over the past decade, inequality has risen faster in states with progressive income taxes. States without a progressive income tax, on the other hand, have seen faster economic growth, faster employment growth, and faster growth in wages and salaries over the past decade.
• Since 2006, states without a progressive tax saw their gross state product grow by 14.7 percent, while states with a progressive tax have seen 10.8 percent GSP growth.
• Nonfarm payrolls have increased 7.8 percent since 2006 in states without a progressive income tax, compared with 5.1 percent in states with a progressive income tax.
• Since 2006, wages and salaries have increased 15.3 percent in states without a progressive income tax, compared with 12.6 percent in states with a progressive income tax.

The Illinois Policy Institute created an interactive calculator for families in Illinois to see just how much more they would pay under the proposed progressive tax. It can be found at http://illin.is/progressivetax.

The full report, “False promises, real harm: Why Illinoisans should reject a progressive income tax,” is available at http://illin.is/progressivetax2.

The path to a progressive tax:
Democratic gubernatorial candidate J.B. Pritzker and many Democratic state lawmakers are advocating for a constitutional amendment that would replace Illinois’ flat income tax with a progressive income tax. If that happens, state politicians would be able to set new, higher tax rates on different income groups. Under House Bill 3522, income between $0 and $7,500 would be taxed at 4 percent. For income between $7,500 and $15,000, the rate would be 5.84 percent. For income between $15,000 and $225,000, the rate would be 6.27 percent. And for income over $225,000, the rate would be 7.65 percent. This increase would come on the heels of the 32 percent income tax hike enacted in July 2017.

For bookings or interviews, contact Melanie Krakauer at media@illinoispolicy.org or (312) 346-5700.