Madison - St. Clair Record

Monday, September 23, 2019

Pritizker 'fair tax' comes with a marriage penalty

Their View

By Joe Kaiser, Illinois Policy Institute | Mar 20, 2019


All taxpayers and businesses should be wary of Gov. J.B. Pritzker’s plan to eliminate the Illinois Constitution’s flat tax protection, but couples soon to be married might have added concern.

Unlike the federal income tax system, Gov. J.B. Pritzker’s progressive income tax rates do not differentiate between single and joint filers. That means couples could see a hefty tax penalty simply for getting married, as their combined income could push them into a higher bracket.

For example, if two earners each making $145,000 married and reached an adjusted gross income of $290,000, they would see a $1,061 marriage penalty as opposed to being single filers. They would also see a $930 tax increase compared to today’s current flat rate.

Pritzker’s administration issued a response to a DePaul University professor who pointed out this problem with his plan, telling political blog Capitol Fax, “Current Illinois tax code does not distinguish between married and single filers.” Of course, under a flat tax system, it is unnecessary to distinguish between married and single filers.

“There’s little to no evidence to support the claim that people base their decision to marry on tax rates,” Pritzker’s administration added. But the problem with a marriage penalty does not necessarily have anything to do with marriage rates. It’s simply unfair to punish families with higher tax bills due to marriage.

There’s also evidence that tax policy affects the labor force participation of mothers with young children who have previously left the workforce and are weighing whether to go back to work or stay at home a little longer. Because of this, a high marriage penalty could result in more women choosing to delay re-entry into the Illinois workforce, hurting the state’s economy as a whole.

Of course, the level of Pritzker’s marriage penalty is only considering his rates as they are currently proposed. But to meet the governor’s $19 billion in new spending promises, those rates would need to be increased across the board, with the typical Illinois family paying $3,500 more in taxes. And as the income tax rates creep up, so would the marriage penalty.

This is one of several hits Illinois taxpayers will incur if the fair tax becomes law. Under the proposed rates, about a quarter of small businesses would see a tax hike – which should concern not just business owners, but Illinoisans seeking work as small businesses create nearly two-thirds of the state’s new jobs. The nonpartisan Tax Foundation has said the fair tax would sink Illinois’ business tax climate to 48th out of 50 states.

Illinoisans can’t afford this tax hike. Though its moniker implies fairness, Pritzker’s proposed tax rates are unfair to all Illinoisans, with working families getting hit with an added penalty. It’s another way the switch to a graduated income tax is a bridge to higher taxes.

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