|
WHY
ILLINOIS LAWMAKERS CAN AND SHOULD WITHDRAW THE PROGRESSIVE INCOME TAX
HIKE
Illinois Policy Institute/
Bryce Hill
State lawmakers in 2019
passed a progressive income tax amendment at the behest of Gov. J.B.
Pritzker. Now that coronavirus has ravaged the state’s small business
community, they should withdraw the amendment. |
|
 Illinois small businesses are reeling in the wake of the
COVID-19 pandemic and associated economic shutdown.
And without action from the General Assembly, they’ll be staring down a crushing
tax hike as well.
The progressive income tax amendment passed by the General Assembly last year
removes Illinois’ flat income tax protection, allowing for a $3.7 billion income
tax hike that would raise taxes on around 100,000 small businesses across the
state.
Small business owners from Decatur to Oak Lawn to Palos Hills to Bradford to Elk
Grove Village to Chicago and beyond are pleading for state lawmakers to remove
that amendment.
Illinois Senate President Don Harmon, a chief sponsor of the progressive income
tax amendment last year, was unsure about lawmakers’ ability to withdraw the tax
hike proposal in an April 5 interview on WCIA.
“I don’t know if there’s even a mechanism to take it off the ballot,” he said.
But the Illinois Constitution clearly lays out the rules for
withdrawing a constitutional amendment initiated by the General Assembly,
requiring only a simple majority vote in the House and Senate to do so.
The constitution states:
“Amendments approved by the vote of three-fifths of the members elected to each
house shall be submitted to the electors at the general election next occurring
at least six months after such legislative approval, unless withdrawn by a vote
of a majority of the members elected to each house.”
Harmon noted the introductory rate structure only hikes taxes on income over
$250,000. The plan also offers miniscule tax relief to those making under
$250,000, which has already been wiped out by gas tax and vehicle fee increases,
not to mention rising property tax bills that rank as the highest in the nation.
Further, lawmakers offered no protection against future income tax hikes on the
middle class.
[ to
top of second column] |
“Most small businesses are just individuals who are
the beneficiaries of their business operation, they get a
pass-through income and they pay the individual income tax,” Harmon
said. Harmon is correct. And that’s why lawmakers must remove the
ballot question.
The progressive income tax rate structure passed by
the General Assembly would hike taxes on around 100,000 Illinois
small business owners in Illinois who file as S-corps or
partnerships (also known as “pass-through” businesses). Small
businesses are the economic engine of the state – responsible for
roughly 60% of new job creation. Hiking their taxes would only serve
to kneecap the economic recovery from the current downturn.
Beyond the hike on pass-through business income, Gov. J.B.
Pritzker’s progressive income package would also hike Illinois’
total corporate income tax rate to at least 10.49%, and state law
would allow for a corporate tax rate as high as 15.28%.
For context, the nation’s highest marginal corporate income tax rate
is 12% in Iowa, according to the Tax Foundation. And that’s
scheduled to drop to 9.8% in 2021. The second-highest is New Jersey
at 10.5%, putting Illinois in a virtual tie for the highest tax on
business income should the new rates take effect.
This is the exact opposite of what Illinois lawmakers should be
doing after the first year on record where Illinois lost
private-sector jobs amid a national boom.
Instead pursuing an expensive and contentious ballot fight that
could end with tax hikes on Illinois small businesses at a terrible
time, lawmakers should listen to local entrepreneurs and withdraw
the question altogether.
Click here to respond to the editor about this article
|
