In election season, some Illinois politicians are looking for ways to promise more revenue without inciting the rage of voters, who just saw the largest permanent income tax hike in state history last summer.
Enter the progressive income tax.
Instead of addressing the things that make state and local governments cost so much, Illinois can solve all its problems by “making the rich pay their fair share,” supporters of a progressive tax argue. This idea has become a key pillar of J.B. Pritzker’s gubernatorial campaign after swirling around the Statehouse air for the past decade or so.
Illinoisans need to be keeping a close eye on the issue, the timeline and the politics of it all. Why does it matter? Because once the progressive tax is in place, residents should prepare to shoulder a host of tax hikes Springfield deems “fair.”
The issue
Right now in Illinois, we all pay the same state income tax rate. Illinoisans pay $2,475 in state income taxes on $50,000 of taxable income (4.95 percent) and $24,750 on $500,000 of taxable income (also 4.95 percent), for example.
Scrapping Illinois’ constitutional protection of this “flat” income tax structure would be the culmination of years of advocacy from unions and union-affiliated groups who think Illinois’ problems are driven by a lack of tax revenue – not a lack of common sense and fairness in spending.
However, this change requires a constitutional amendment, which needs approval from voters at the ballot box.
The timeline
To get the constitutional amendment on ballots in November, proponents need a three-fifths majority vote in both the House and Senate by May 6. A constitutional amendment does not require the governor’s signature.
If the constitutional amendment begins to move, it likely will come out of the House first. But the clock is ticking. Since the House is taking off the first week in May, the latest they could pass this amendment would be April 27.
But proponents have already made a critical error. They showed their rates, and they’re not pretty. That doesn’t mean the issue is dead, however – far from it.
The politics
There are three constitutional amendments currently floating around the General Assembly that would eliminate Illinois’ flat income tax. But sponsors of these amendments haven’t even stated what the new rates could be.
State Rep. Robert Martwick, D-Chicago, however, introduced a bill called the “FRIENDLY Act” last year, which lays out income tax rates under a progressive tax structure. That bill is currently assigned to a House subcommittee.
Under Martwick’s progressive tax plan, Illinoisans earning as little as $17,300 would see their income taxes go up. Oops.
Martwick’s error triggered enormous backlash. In the last month, more than 10,000 Illinoisans have signed a petition on illinoispolicy.org opposing a progressive income tax.
So what’s the next move?
There’s talk of a plan mirroring one proposed in 2016 by state Rep. Lou Lang, a Cook County Democrat. Lang’s rates could be tacked on to a progressive tax constitutional amendment filed by state Rep. Christian Mitchell, a Chicago Democrat.
Lang’s plan would drastically raise the tax rate on income over $750,000 (or $500,000 for individual filers), and raise it even more for income over $1.5 million ($1 million for individual filers). At the same time, it would reduce the tax rate for income below the $750,000 threshold (or $500,000 for individual filers).
But its supporters fail to understand two things: small-business owners – who create the majority of new jobs in Illinois – would be crushed, and this plan wouldn’t generate enough revenue to spend what its supporters would like to.
An analysis of Lang’s rates using 2015 tax data from the IRS shows they would generate around $12 billion from Illinoisans versus the current $17 billion, leaving the state with a revenue shortfall of about $5 billion.
What happens when lawmakers can’t raise enough cash to spend big? More tax hikes and borrowing. Illinoisans know how that works out.
Thankfully, state Rep. David McSweeney, R-Barrington Hills, has introduced a resolution opposing a progressive income tax in Illinois. Two dozen co-sponsors have signed on to the resolution – HR 891 – as of April 5. If your lawmaker isn’t one of them, reach out.
If Springfield wants an alternative to constant overtaxing, legislative leaders should get behind a different constitutional amendment currently in the General Assembly that enjoys bipartisan support: a spending cap.
Protecting taxpayers by ensuring they’re getting a state government they can afford? That’s friendly.
Austin Berg is a writer for the Illinois Policy Institute. He wrote this column for the Illinois News Network. Austin can be reached at aberg@illinoispolicy.org.