CHICAGO – The Democrat-controlled Illinois legislature passed a state income tax increase on all working Illinoisans in July and experts say it could hurt the middle class in addition to the impact on the middle class that's expected to occur if the tax bill currently in Congress passes.
Carol Portman, president of the Taxpayer Federation of Illinois, told the Record the middle class will definitely be affected by the changes in the state tax code, but will also be impacted by the proposed changes in the federal tax code bill now in Congress.
“It is a legitimate concern that many middle class Illinoisans could see a tax increase, rather than a reduction," Portman said.
She also noted the impact may be hard to predict.
“It depends on tons of factors that vary from person to person and business to business, and because we don’t know for sure what the final federal changes will look like (or if there will even be any), we can’t say for sure,” she said.
The cutting of itemized deductions for state and local taxes will certainly have an impact, she said.
“One of the big changes in most of the federal proposals is the elimination of the itemized deduction for state and local taxes paid. Many Illinoisans benefit from that deduction, so could be facing higher federal taxes as a result. That is particularly frustrating because Illinois gets less in federal funding than Illinoisans pay in federal income tax,” she said.
“Illinois’ income taxes were increased this year as a result of a bi-partisan vote in the General Assembly," she said. "So, for the folks who are currently taking the federal deduction for state and local taxes paid, losing that deduction will now cost more than it would have in earlier years since their taxes paid has gone up. In other words, the federal deduction effectively softened the blow of the Illinois tax hike, and if the deduction goes away, impacted taxpayers will no longer get that softening effect."
On the other hand, Portman said the standard deduction could be increasing, so fewer people would have been itemizing anyway, so losing the deduction wouldn’t matter,
"The same is true for anyone dealing with increased property taxes,” she said.