Bill Knight column for Mon., Tues. or Wed., May 2, 3 or 4
Thirty-four states with an income tax have a graduated system, as does the federal government; seven have no income tax; Illinois is one of just nine with a flat tax.
A burden on regular people because they pay the same as those with extra money, Illinois’ flat tax was created in 1970’s Constitutional Convention, which established an across-the-board tax that’s never taken into account taxpayers’ ability to pay.
Last week, Illinois’ Senate delayed voting on a constitutional amendment to let voters decide on changing to a graduated tax in November, along with other proposed amendments reforming how legislative districts are set and eliminating the lieutenant governor position.
But the General Assembly is scheduled to return on Tuesday (May 3) and must vote this week for the measure to make it onto the ballot.
Meanwhile, State Rep. Lou Lang (D-Skokie) moved to consider an amendment to permit a graduated (or progressive) income tax. If that passes, Democrats say they’ll introduce legislation that would cut taxes to all but the wealthiest taxpayers and raise an additional $1.9 billion a year.
Lang suggests a tax rate on incomes up to $100,000 (twice that for couples) would be cut to 3.5 percent; increasing to the current rate of 3.75 percent for incomes up to $750,000; to 8.75 percent for the next $750,000, and to 9.75 percent for income above $1.5 million for couples filing jointly. Corporate income taxes would be unaffected.
Similar efforts failed in 2014, but last year the temporary 5-percent income tax approved in 2011 expired, so lawmakers facing a growing debt may reconsider.
Supporters say taxing the rich more could stabilize the economy and society, adding that a graduated income tax would not only be fairer to the working class and middle class, but would raise much-needed revenue when Illinois needs funds to continue the programs people want and underwrite education and infrastructure, which attract businesses and offer children chances to succeed even if their families are poor.
“We support a fair tax where people who make a higher amount pay a higher rate and people who make a lower amount pay a lower rate because that’s the most fair way to make sure that children and families are not carrying a heavier tax load than they should be carrying,” Emily Miller of Voices for Illinois Children told Jamey Dunn in Illinois Issues magazine.
The Senate has a measure to amend the constitution to permit a graduated system. To change the constitution, three-fifths of the Senate and the House must OK it, and also three-fifths of November voters.
Opponents say it’s a scheme to seize more money. That’s not incorrect, but the state’s backlog of unpaid bills could hit $10 billion this summer, so it’s not spendthrift foolishness to meet financial obligations. Those against a graduated tax also say it would drive successful people to other states.
The debate is “a battle between ‘fairness’ and a potential business flight from the state,” summarized Greg Hinz in Chicago Business magazine. But the “vast majority of the state's taxpayers … will be untouched.”
Plus, income tax rates are higher in surrounding states, according to the Illinois Economic Policy Institute. Compared to Illinois’ 3.75-percent flat tax, Indiana’s is 3.3 but with county income taxes that hike its average to 4.8 percent; Iowa is up to 8.9 percent; Kentucky is 6 percent; Missouri is up to 6 percent; and Wisconsin is 7.65 percent. Also, nearby states tax services and some retirement income, too.
“Adopting Indiana’s tax structure would give Illinois $4.6 billion more each year,” writes Curtis Black in Chicago Reporter. “Using Iowa’s structure would bring in $7.3 billion more, and Wisconsin’s would yield $8.3 billion more. That would put Illinois in the clear.”
The idea is popular with voters, who in 2014 overwhelmingly voted to enact a “millionaires tax” increasing taxes on incomes greater than $1 million by 3 percent. But in an election year, lawmakers’ backbones to do what’s right are weakened by the fear of political attacks.
“Lower rates would apply to lower incomes and higher rates would apply to higher incomes,” said Michelle Paul of the Illinois Federation of Teachers. “Eliminating our current flat tax will give 99.3 percent of Illinoisans an overdue tax cut and raise about $1.9 billion for public education and state services.”
Isn’t it time for the wealthy to pay their fair share?
Say a prayer.
[PICTURED: Graphic and data from the Tax Foundation.]