By TIM ALEXANDER
SPRINGFIELD, Ill. — The Illinois House continued to discuss possible changes to a proposed graduated – or progressive – income tax format endorsed by Democratic Gov. JB Pritzker.
On May 1, the state Senate approved a series of proposals its Democrats say will update the state’s tax structure and provide relief to working and middle-class families. Sen. Toi Hutchinson (D-Chicago Heights) sponsored Senate Bill 687, which sets a graduated rate structure allowing those making less than $250,000 per year to pay less in taxes, while wealthier individuals pay more.
“In the absence of this plan, we can raise taxes on every Illinois family or slash an additional 15 percent of funding to our public schools, colleges, and public safety programs,” Hutchinson said. “There are no other options or budget gimmicks. We must act.”
Sen. Don Harmon (D-Oak Park) said the changes are necessary to improve a tax structure that has been in place for more than 50 years. “Middle-class and working Illinoisans have been hurt by our inability to modernize our tax structure to reflect a changing economy,” he said.
The Illinois Farm Bureau (IFB) is lobbying members, farmers, and others who are against the graduated tax plan to reach out to their legislators, now that the amendment is in the hands of the House. The amendment must pass both chambers by a supermajority in order to be placed on the November 2020 ballot.
“(The amendment) will need 71 affirmative votes out of the 118 representatives to be approved in the House,” said Kevin Semlow, IFB director of state legislation.
“Now that the progressive income tax package has moved to the House of Representatives, we are now asking everyone to join me in calling their state representative to ask them to vote ‘no,’” added Richard Guebert Jr., IFB president. “We need to continue to let our elected officials know that we feel the current flat rate income tax is the preferred way to tax incomes in Illinois.”
As support for a graduated tax plan gained momentum in the General Assembly, a surprise uptick in the state’s economy compelled opponents of the plan to suggest Illinois’ problems are solved and the status quo would suffice. This is simply not the case, according to state Senate Dems.
“Manna from heaven may get us out of the desert, but it will not feed us for years to come,” said Harmon in a May 9 Capitol news conference. “A fair tax is our only option to ensure long-term stability for our state.”
Pritzker announced last week that a recent economic surge resulted in an “unexpected” $1.5 billion coming into the state treasury. He said the funds will be used to help honor the state’s retirement system payment.
“We have patched one hole in a very leaky boat,” said Hutchinson, who is the sponsor of a fair tax rates plan that would take effect if S.B. 687 gains approval. “This is the beginning of a very long, very hard recovery process.”
Proponents of the progressive tax plan claim 97 percent of Illinois taxpayers would see no increase or a reduction in income tax paid to the state. A study at the Center for Tax and Budget Accountability (CTBA) in Chicago found the state could raise as much as $2 billion more in income tax revenue under the plan, while reducing taxes for the majority of the state’s population.
The CTBA study determined that Illinois’ current tax model benefits high-income earners and places a disproportionate tax burden on lesser earners.
“In Illinois, the top 1 percent of income earners pay just 4.6 percent of their income in state and local taxes, while the middle 20 percent of workers pay more than double that, coming in at 10.8 percent of income, and the bottom 20 percent of earners have almost three times the tax burden of the wealthiest, coming in at 13.2 percent,” the CTBA report reads, in part.
Detractors argue that Pritzker’s model would cripple the state’s ability to attract new business and compel more people to leave Illinois. However, of the 43 states that impose a state income tax, only eight have a “flat” income tax such as currently imposed in Illinois – along with Indiana and Michigan in the Midwest.
Graduated or progressive income tax models are currently in use in Ohio, Kentucky, Iowa, Missouri, Minnesota, and Michigan in the Midwest.