What to know about the progressive tax vote

November 2, 2020

Illinois Policy Institute experts available for comment ahead of Election Day

CHICAGO (Nov. 2, 2020) – For the first time in more than 50 years, Illinois voters will get the chance to vote against a statewide income tax hike tomorrow by rejecting state leaders’ bid to scrap the state’s flat tax protection.

Gov. J.B. Pritzker has spent $56.5 million to persuade voters to accept the so-called “fair tax.” But the amendment on tomorrow’s ballot would change the Illinois Constitution to also grant state lawmakers greater taxing powers that could crush small businesses, retirees and the middle class.

Experts from the nonpartisan Illinois Policy Institute are available to provide commentary on the progressive tax for media interviews in Chicago, Springfield and across Illinois.
WHAT TO KNOW:

New taxing authority

  • The “fair tax” could open the door to additional taxation, particularly on retirement income. State Treasurer Michael Frerichs confirmed this during a Chamber of Commerce event during the summer. Across the nation, all 32 states with a graduated tax system also tax retirement income in some form.
  • Local municipalities could be more likely to levy city income taxes to make up budget deficits. The original language of the “fair tax” amendment explicitly banned local income taxes in Illinois, but lawmakers removed that protection before passing the plan to voters.

Effects on Illinoisans

  • Graduated rates can be changed by lawmakers at different times and at will. When the governor took office, he promised the progressive tax would cover $10 billion worth of new spending. It would cost the typical family $1,113 more in income taxes to fund those promises, and that estimate doesn’t even include some of the governor’s more ambitious spending plans.
  • Meanwhile, the typical Illinois family can expect to pay $244 more in state and local taxes next year even with the “fair tax.”
  • Progressive tax rates would hike taxes by up to 47% on over 100,000 small businesses in Illinois, which create the majority of the state’s jobs. The structure also allows for the highest effective corporate tax in the nation, as high as 15.28%. Initial rates would bring corporate taxes to the nation’s second highest.

Constitutional language

  • State-issued ballot guides mailed to Illinoisans contain misleading arguments about Pritzker’s progressive tax, which are then repeated in the ballot description for the amendment. The ballot does not provide voters with the actual constitutional language being changed, which allows the General Assembly to set any desired “rate or rates” for income taxation via simple majority vote.
  • The description of the “fair tax” question claims it targets higher-income earners. That is not so: the amendment gives lawmakers the ability to charge any rate for any income group, not just high-income taxpayers. Retirees joined the Illinois Policy Institute to challenge this ballot language, arguing that it violates the “free and equal elections” clause of the Illinois Constitution. The rates are not included in the constitution, either, and there are no taxpayer protections or limitations on how high rates could rise for individuals.

Adam Schuster, senior director of budget and tax research at the nonpartisan Illinois Policy Institute, provided the following statement:

“Election Day provides Illinoisans a final opportunity to tell lawmakers ‘no’ to new, unprecedented taxing powers. The progressive tax is not about reducing taxes for the middle class; it’s about eliminating taxpayer protections from the state constitution and opening the door for damaging new tax hikes.

“Gov. Pritzker’s tax hike would ultimately extend far beyond the wealthy few, unfairly hitting seniors, small businesses and working families with a higher tax bill year after year.”

For more on the Institute’s research on the effects of a progressive tax in Illinois, visit: illin.is/PITstudy.