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 A blank check for state lawmakers is moving through the
Illinois Senate.
The Illinois Senate Executive committee voted 12-5 today to approve SJRCA 1,
which would eliminate the state’s flat tax protection, and allow for a
progressive, or graduated income tax. That amendment would be subject to voter
approval on the 2020 ballot.
But who will pay more, and how much more, is still an open question. Gov. J.B.
Pritzker has been pushing his proposed progressive income tax plan for weeks,
which he calls a “fair tax,” but the proposal has yet to appear in bill form.
Given Pritzker’s unwillingness to slow Illinois’ new spending and debt, and bad
math from his administration, a graduated income tax would be a bridge to higher
taxes for the middle class.
Two simple examples show why:
First, Pritzker’s estimated $3.4 billion in new revenue from his progressive
income tax plan would be enough to fund a mere four monthsof state pension
costs. Only Pritzker has been able to work that math, with no outside group able
to replicate his revenue claim.
Second, his promise of income tax relief – which Pritzker has already walked
back– 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.
States with progressive income taxes see slower economic growth and slower jobs
growth than states without.
Pritzker’s plan threatens to do the same. The nonpartisan Tax Foundation
estimates the governor’s proposed rates would sink Illinois’ business tax
climate to 48th of the 50 states.
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Finally, progressive income tax states are losing residents en masse to states
that don’t levy an income tax. Progressive income tax states lost nearly 300,000
residents from July 2017 to July 2018 as a group. Meanwhile, states with no
income tax gained more than 300,000 residents. And taken together, flat income
tax states excluding Illinois also gained residents from other states.
Pritzker’s goals – healthy state finances, a strong economy and a tax cut for
the middle class – cannot be achieved by the means he’s proposed.
Instead, Pritzker should look to structurally reform Illinois’ spending to
address the largest cost drivers of the state’s fiscal problems: government
worker health care costs and pension benefits. The Illinois Policy Institute
shows how commonsense, bipartisan reforms can be achieved in “Budget Solutions
2020: A 5-year plan to balance Illinois’ budget, pay off debt and cut taxes.”
Of these solutions, a spending cap – which already has bipartisan support in the
General Assembly – would do the most to shore up state finances and prevent
massive budget shortfalls exacerbated by rapidly increased spending.
Lawmakers have two options ahead of them: They can continue to rack up debt and
pursue tax hikes that will further damage the state’s economy, or they can break
with past practices and pursue responsible budgeting that protects both
taxpayers and core government services.
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