The painful push for a progressive tax in Illinois

Orphe Divounguy

Chief Economist

Orphe Divounguy

Bryce Hill

Director of Fiscal and Economic Research

Bryce Hill

Joe Tabor

Director of Policy Research

Joe Tabor
April 4, 2018

The painful push for a progressive tax in Illinois

Instead of pushing for further tax hikes on tapped-out taxpayers, lawmakers should rally behind a bipartisan effort to limit state spending.

The push for scrapping Illinois’ constitutionally protected flat income tax is greater than ever, with Democratic gubernatorial nominee J.B. Pritzker making it a key pillar of his campaign.

A progressive income tax is one of the most foolish policy choices Illinois could enact at a time when residents are experiencing crushing tax burdens, sluggish economic growth and high levels of outmigration.

Legislative efforts

Three constitutional amendments that could result in Illinois enacting a progressive income tax are making their way through the General Assembly this legislative session. If any one of these amendments receives a supermajority vote in the Illinois 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.

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 state Sen. Daniel Biss, D-Evanston. If enacted, these amendments would scrap the provision of the Illinois Constitution that guarantees a flat income tax in favor of a progressive, “graduated” income tax for both individuals and businesses. The proposed amendments 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.

These amendments would allow for the possibility of a progressive income tax in Illinois, but do not specify what tax rates would look like in that system. However, state Rep. Robert Martwick, D-Chicago, has a bill filed in the General Assembly that reveals what income taxes could look like under this system.

House Bill 3522, known as the FRIENDLY Act, would create the following tax brackets and corresponding rates:

  • 4 percent for income of $0-$7,500
  • 5.84 percent for income of $7,501-$15,000
  • 6.27 percent for income of $15,001-$225,000
  • 7.65 percent for income above $225,000

Martwick’s proposal makes clear the fact that in Illinois, a progressive income tax is a tax hike on the middle class. Illinoisans earning as little as $17,300 would see their income tax bills rise. Overall, Martwick’s bill would result in a 21 percent income tax increase, coming just one year after the largest permanent income tax hike in state history.

Enough is enough

Illinoisans shouldn’t be sending larger chunks of their paychecks to Springfield.

Over the past decade the state has been on a spending spree. From 2005 to 2015, state government expenditures have increased 25 percent faster than personal incomes in Illinois. And so long as spending continues to outpace revenues, Illinois will be faced with two options: increase taxes today or take on even more debt, which means raising taxes in the future.

Illinois’ outstanding debt is already sky high, and if the General Assembly continues its spending spree, the state’s revenues will never be able to catch up. The debt is increasing not only because of borrowing, but also because of the interest that collects on the principal each year.

And there’s no sign of the growth of debt slowing anytime soon. Without a way to restrict spending to responsible levels, future tax hikes will be inevitable.

Turning the ship around

Luckily for taxpayers, there are lawmakers who are fighting to rein in the growth of government spending and provide fiscal stability in Springfield. There are constitutional amendments in both chambers of the General Assembly – with bipartisan support – that would limit the growth of government spending to what taxpayers can afford.

State Sen. Tom Cullerton, D-Villa Park, and state Sen. Michael Connelly, R-Naperville, are the chief sponsors of SJRCA 21, an amendment that would constrain the growth in state government spending to the growth in Illinois’ economy. State Sen. Dale Righter, R-Mattoon, and state Sen. Steve Landek, D-Bridgeview, are also co-sponsoring the bill.

In the House, state Rep. Allen Skillicorn, R-East Dundee, is the chief sponsor of HJRCA 38, another constitutional amendment that would also tie the growth in state spending to growth in the state’s economy.

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 injects uncertainty into the lives of Illinoisans.

Families and businesses can’t plan for their futures without some degree of certainty about the world they’ll live in five, 10 or 20 years down the road. The state of the state meddles with those plans.

If lawmakers continue their current spending spree, tax hikes will continue to be a persistent trend in Illinois, and so too will declining investment and job creation. Without confidence in the economy to invest, Illinoisans will find it harder and harder to find gainful employment within Illinois and feel even more pressure to flee to other states.

Hopefully other lawmakers follow the lead of Cullerton, Connelly, Skillicorn, Righter and Landek in reining in government spending, averting future tax hikes and providing stability for Illinois families.

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