SPRINGFIELD – Passage of a statewide graduated income tax structure isn’t possible until after November 2020, but Democratic Gov. J.B. Pritzker continued to stump for such a proposal Tuesday, announcing the launch of an online “fair tax calculator” at a Chicago news conference.
Per the calculator, which is available at Illinois.gov/fairtaxcalculator, earners would not see an overall income tax increase under Pritzker’s plan until their taxable income reaches $252,336, putting them in the fourth of six proposed income brackets. The tax bill for that household would be $1 more than if the income was taxed at the current flat rate of 4.95 percent.
Under Pritzker’s plan, only earners whose income exceeds $1 million would be taxed at a flat rate – 7.95 percent – on every penny of income.
For all other earners, different rates ranging from 4.75 percent to 7.85 percent would apply to different margins of income, and the calculator would show how much more or less an earner would pay under the new plan.
“For those who earn up to $250,000, this calculator will show you that you will get tax relief,” Pritzker said, acknowledging that it would be “modest” relief in many situations.
The lowest bracket’s rate is 4.75 percent and it applies to an earner’s income from $0 to $10,000. Once an earner’s income reaches the second bracket, the 4.75 rate would still apply to the first $10,000, and a 4.9 percent rate would apply from income between $10,001 and $100,000.
This structure continues through bracket three (4.95 percent on income margins between $100,001 and $250,000), bracket four (7.75 percent for income margins between $250,001 and $500,000), and bracket five (7.85 percent for income between $500,001 and $1 million).
From the governor’s perspective, the graduated tax is his best option to raise the $3.4 billion necessary to balance the state’s current multi-billion-dollar budget hole. One other option is a 15 percent cut to all state funds, including K-12 education.
Republicans have argued that passing a graduated tax would allow Democrats to raise the tax bracket rates in the future, but Pritzker pointed out that the Legislature already has the authority to raise taxes. In fact, he said, his third option for balancing the budget is a 20 percent tax increase on 100 percent of Illinoisans if the graduated tax does not become law.
“I respect the rights of opponents to disagree with this proposal,” Pritzker said. “While they may not agree with my approach, they should do so in good faith and with a specific counter-proposal, not pie in the sky.”
Every House Republican signed onto a resolution opposing a graduated tax last month, and the Senate Republican caucus released a statement last week saying “without guaranteed protections for middle class families, we are opposed to the governor’s $3.4 billion tax increase.”
Assistant House Minority Leader Tom Demmer, a Dixon Republican, reiterated that sentiment Tuesday, noting that added revenue from the plan wouldn’t be available until sometime between fiscal year 2021 and 2022, because a constitutional amendment is required to implement it.
An amendment would require a three-fifths vote from both the Illinois House and Senate to place a question on the 2020 presidential election ballot, then it would need approval from 60 percent of those voting on the question or a majority of those voting in the election. After that, the Legislature would have to approve rates for the governor to sign.
“You’re kind of comparing apples and oranges in terms of his plan for a $3.4 billion tax increase three years from now versus the work that we have to do today to make this current fiscal year and next fiscal year’s budgets work well,” Demmer said.
Demmer gave a list of added budget strains Republicans would oppose – including implementation of the minimum wage increase and single payer health care, the former of which is already law – and he said Republicans would prefer to talk about such issues as job creation, workers’ compensation reform and investment in education.
But he stopped short of offering specific alternatives to closing the multi-billion-dollar structural gap in the state’s budget.
“Step one is let’s come up with a revenue estimate. Let’s bring in appropriations committees in the House and the Senate and start having hearings,” Demmer said. “Bring in agency directors, bring in advocacy groups to talk about what they see for this upcoming year, then let’s try to close that gap in a collaborative way.”
Demmer acknowledged most of those groups would be asking for more money, not volunteering cuts, but he said they would prioritize their expenditures to paint a clearer picture of budget needs.
“I think you have to say everything is going to be on the table. Cuts are certainly going to be on the table. So are programmatic restructuring, reprioritizing what happens in an agency,” he said. “We’re not going to just come to the table and dictate things have to happen according to our plan. We want to be a collaborative part of this and work in good faith to try and close the budget deficit.”
Demmer said Republicans welcome negotiation on this year’s budget, but the House Republicans’ unanimously-signed House Resolution 153 says there is “no need to negotiate” on the graduated income tax matter.
“We’ve raised taxes twice in the last decade, we haven’t made other changes to the way this state operates, and we find ourselves continuing to feel the pressure of growing expenditures and insufficient revenue,” he said. “Unless we want to get together and seriously talk about what are some ways we can make Illinois’ economy more resilient and add jobs to the state, and we can bring people back to the state of Illinois, unless we’re ready to do that, it’s a real problem. Simply going back to another tax increase alone is not going to solve our issue.”
Alone or coupled with reforms, however, Demmer said his caucus will continue to stand unanimously opposed to a graduated tax.