Springfield proposals pushing income tax plan voters already rejected

Illinois voters rejected a graduated income tax in 2020. State politicians are trying again.

Three proposed amendments to the Illinois Constitution would repeal the flat income tax protection and dramatically expand the state’s authority to raise taxes.

The measures would allow the state to impose a litany of taxes on a variety of income types and amounts.

Senate Joint Resolution Constitutional Amendment 4 and House Joint Resolution Constitutional Amendment 16 would eliminate the constitutional requirement that income be taxed at one flat rate. That means lawmakers could impose as many tax brackets – and rates – as they want.

Last time a measure like this was advanced, lawmakers proposed six new tax brackets with rates ranging from 4.75% to 7.99%. They expected to increase income taxes by $3.7 billion.

House Joint Resolution Constitutional Amendment 21 takes a slightly different approach, adding a 3% surcharge on income above $1 million. But like the other proposals, it opens the door for taxes on new types of income while beginning to dismantle the flat-tax guardrail.

Supporters are branding the effort as a “millionaires tax.” Illinois voters have heard that promise before. In 2020 they rejected a similar pitch after recognizing the real issue wasn’t fairness — it was power. Repealing the flat tax would give Springfield more ways to raise revenue without first fixing the state’s spending problem.

Illinois requires any income tax to be imposed at a single, non-graduated rate. Lawmakers can raise or reduce that rate, but they must apply it evenly. That limits politicians’ authority to target specific groups of taxpayers, and it forces transparency: When taxes go up, they go up for everyone.

Remove that protection and everything changes.

First, lawmakers would gain authority to create multiple tax brackets with escalating marginal rates. Even if initial legislation targets only the highest earners, nothing prevents future expansions. Illinois has repeatedly enacted “temporary” income tax increases that became permanent. Broader taxing authority makes it easier to expand higher rates to smaller income thresholds over time.

Second, eliminating the flat-tax requirement would allow lawmakers to treat different types of income differently. When legislators tried to pass a graduated income tax in 2020, state Treasurer Michael Frerichs admitted the measure would make a retirement income tax — currently banned in Illinois — more likely.

Also, Illinois taxes capital gains as part of income at the same flat rate as wages. Without the constitutional guardrail, lawmakers could impose a higher rate on those gains, arguing that they primarily benefit the wealthy.

But capital gains taxes don’t just hit hedge fund managers. Small business owners often rely on the sale of their company to fund retirement. Farmers depend on land sales to transition operations to the next generation. Entrepreneurs take on years of risk with the expectation that a successful exit will reward their effort.

A higher capital gains rate reduces that reward and weakens incentives to invest in Illinois.

The same logic applies to other income categories. Lawmakers could layer “surtaxes” onto pass-through business income. They could impose additional brackets over time. They could narrow the base of taxpayers responsible for funding state government, increasing reliance on a smaller group while making revenues more volatile.

That volatility matters. States with highly progressive income taxes tend to see sharper swings in revenue, because high earners’ income — particularly capital gains — fluctuates with the market. When revenues fall during downturns, lawmakers face pressure to raise rates or expand taxes to additional groups. The result is often a ratcheting effect: Rates rise in good times and rarely fall in bad.

Illinois faces serious fiscal challenges, including structural deficits and one of the largest unfunded pension liabilities in the country. None of the amendment proposals addresses those cost drivers. Instead, they focus on expanding the state’s ability to collect more revenue.

That approach ignores a basic reality: Illinois does not have a revenue problem so much as a spending problem. Without structural reform, additional taxing authority becomes a substitute for addressing unsustainable costs.

Illinois also continues to lose residents and businesses to neighboring states with more predictable tax structures. Expanding the state’s authority to impose higher marginal rates or targeted capital gains taxes sends a clear signal to job creators: Success may bring a higher tax bill.

In a region where families and businesses can move across state lines, that signal has consequences.

The flat income tax does not prevent lawmakers from raising taxes. It does require them to do so transparently and broadly. That creates accountability. A graduated system allows lawmakers to concentrate tax increases on narrower groups, reducing immediate political resistance while expanding government’s long-term reach.

Illinois voters recognized this dynamic in 2020 and rejected previous calls for higher taxation. The question now is whether lawmakers will respect that decision or continue seeking expanded taxing power.

At a time when the state needs economic growth, population stability and fiscal discipline, removing the flat-tax protection would move Illinois in the wrong direction. Rather than granting Springfield new tools to raise taxes on income, capital gains and small businesses, policymakers should focus on structural reforms that address spending and restore competitiveness.

The issue is not whether lawmakers can design a graduated tax. It’s whether Illinois — given its fiscal track record — should give them broader authority to do so.

Taxpayers have good reason to be skeptical.