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 Lawmakers in the Illinois Senate have stalled their push to
advance Gov. J.B. Pritzker’s progressive tax.
Days after the Senate Executive Committee voted to send Senate Joint Resolution
Constitutional Amendment 1 to the Senate floor, lawmakers in the upper chamber
on April 12 decided against voting on the proposal that would clear the way so
Illinois’ income tax system could be changed from flat to graduated, or
“progressive.”
Pritzker has made enacting a progressive income tax, which he calls a “fair
tax,” a top priority of his administration, urging lawmakers to pass such a tax
by the end of May. The General Assembly is scheduled to return to Springfield
April 30 after a two-week spring break.
While the reason behind the Senate’s delay is unclear, lawmakers are justified
in tapping the brakes.
Whether tax rates under SJRCA 1 would be “fair” is still an open question, as
the proposed amendment lacks any specific tax rates. In fact, given Illinois’
spending and debt problems, a tax hike on the middle class would be inevitable –
with the typical family seeing an income tax increase of up to $3,500 to fund
Pritzker’s spending promises.
 What’s more, Pritzker’s proposal would remove language from the Illinois
Constitution protecting Illinoisans against double taxation. The state would be
able to impose additional taxes or fees atop income taxes, effectively taxing
Illinoisans more than once on the same dollar earned. The state could adopt a
surcharge on income dedicated entirely to shoring up Illinois’ $134 billion
pension debt, for example.
Business owners would also lose a significant protection under Pritzker’s
proposal. The Illinois Constitution currently caps the corporate income tax rate
at 1.6 times the individual income tax rate. SJRCA 1 would change that to the
highest marginal rate, which Pritzker would like to raise to 7.95%. Factoring in
the state’s 2.5% Personal Property Replacement Tax, this would spike Illinois’
corporate rate to 15.22% – the highest in the nation.
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Pritzker initially pledged tax relief for 97% of
Illinoisans under his plan. But after weeks of struggling to show
the math supporting that claim, the governor’s own office has begun
walking it back. Regardless, his promised relief would be wiped out
by typical growth in property tax bills. Pension costs and other
benefits, along with debt, drive the majority of Illinois’ property
tax growth.
Given the state’s severe fiscal problems, Illinoisans are right to
be skeptical of handing lawmakers a blank check to raise income
taxes indefinitely. Polling shows likely voters in seven critical
House districts held by Democrats are opposed to or split on
Pritzker’s progressive tax plan.
The choice between a progressive income tax hike and austere
spending cuts is a false one. Unless state leaders pursue meaningful
pension reform, a progressive tax would give lawmakers carte blanche
to hike taxes endlessly as they chase down soaring pension costs.
Fortunately, genuine reforms exist: The Illinois Policy Institute’s
Budget Solutions 2020 offers a bipartisan five-year plan that would
balance the state budget while reducing debt and allowing for tax
reductions.
Pritzker and other state leaders should shelve their progressive tax
plans and find the political courage to lead the state toward fiscal
stability – starting with real, lasting pension reform.
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