Illinois Senate Passes Progressive Tax Change With Higher Rates Than Pritzker's

Illinois Capitol building
Illinois Capitol building / Wikimedia Commons

Illinois lawmakers are one step closer to putting Gov. J.B. Pritzker's signature campaign promise on the 2020 ballot: A proposed change to the Illinois constitution that would allow for higher income tax rates on higher levels of income.

"This is the next step in a more than decades-long effort to modernize our tax code," said Sen. Don Harmon, D-Oak Park.

The Senate passed the measure 40-19. Republicans, who are a superminority in the chamber, were unanimous in opposition.

"We believe our current Constitution ... wisely decided that Illinois taxpayers needed protections against politicians," said Minority Leader Bill Brady, R-Bloomington. "The elimination of this flat tax provision, we believe, severely puts at risk raising taxes higher and particularly on the middle class."

Both chambers need to approve the measure with a three-fifths vote before it is placed on the ballot in the fall of 2020. It would need approval from 60 percent of the voters choosing to vote on that question or half of all voters participating in the election.

The change is estimated to bring in $3.57 billion. Raising the corporate income tax from 7 percent to 7.99 percent is estimated to bring in an additional $350 million.

Pritzker has proposed the change as a way to make the state's income tax "fair" in that it would tax people with the ability to pay more while opponents call the change a blank check for lawmakers to hike taxes on smaller groups of people without fearing the political backlash that they otherwise would with a flat income tax.

"With a flat tax, you raise rates on everybody," said Sen. Dan McConchie, R-Hawthorn Woods. "The changing of rates becomes not an issue of first resort but an issue of last resort. As soon as we implement a graduated tax system, we actually make it structurally and politically easier to change those rates and brackets going forward."

Harmon called that argument a "canard." He said it's hard to raise taxes on anyone.

While there are no proposed rates in the constitutional change, lawmakers have tied the change to legislation that was passed shortly after that would set income tax rates at a graduated rate structure that starts at 4.75 percent on income up to $10,000 and tops out at 7.99 percent on all income over $750,000. Joint filers would see similar rates but with a top rate that starts at $1 million.

That measure was approved 36-22.

The rate brackets are lower than what Pritzker had initially proposed, something opponents have used as ammunition.

"Since the governor put out his proposal to the fair tax to what we have today the top marginal rate has already gone up and the income to which the top rate is subject for those filing separately has already come down by $250,000," said state Sen. Dale Righter, R-Mattoon.

Along with the progressive tax, the Senate approved legislation that would eliminate Illinois' estate tax. The Illinois Attorney General's office collected $315 million from that tax in 2018.

The Senate also passed a measure that would, on condition that the state fully funds the school funding formula and other categoricals, local school districts would be subject to a property tax freeze. It would exclude property tax hikes to raise funds for pension payments or debt service.

All of the changes would take effect in 2021.

Thirty-three states have a graduated income tax. Others either have a flat rate or none at all.

Published under: J.B. Pritzker