SPRINGFIELD — The Illinois House of Representatives vote to place a constitutional amendment on the November 2020 ballot to allow for a change from a flat tax system sets up almost a year-and-a-half of campaigning on a progressive income tax.
But what exactly will Illinois residents be voting on?
Voters won't have a say in setting the rates. Rather they will be deciding whether to remove the flat income tax provision in the state's constitution.
Having a progressive income tax system in the state was one of Gov. J.B. Pritzker's campaign promises when he ran to unseat former Gov. Bruce Rauner. Now that he's in office, he and fellow Democrats have dubbed their proposal the "Fair Tax."
The amendment proposal removes the requirement of a flat income tax system. Currently the state income tax is a flat 4.95 percent of income for everyone If passed, the ballot issue would allow the state to have a graduated income tax system, where people who earn more money would pay higher rates.
In order to remove the flat tax provision, 60 percent of people voting on the amendment, or 50 percent of people voting in the election have to approve of the measure.
As part of the efforts to gain support, the Democratically controlled legislature passed a bill that included income tax rates that would be used if the amendment was passed.
Outside of the top brackets, the marginal tax rates in the plan are:
— 4.75 percent for income $0 to $10,000
— 4.9 percent from $10,001 to $100,000
— 4.95 percent from $100,001 to $250,000.
— or married couples, the tax rate would be 7.75 percent from $250,001 to $500,000 and 7.85 percent from $500,001 to $1 million. Income more than $1 million would be taxed at 7.99 percent.
— For single-filing persons, tax rates are the same up to $250,000, while the 7.75 percent rate applies from $250,001 to $350,000 and the 7.85 percent rate applies from $350,001 to $750,000. Income higher than $750,000 would be taxed at 7.99 percent.
The corporate tax rate would be raised to 7.99 percent from its current 7 percent rate. Businesses also pay a corporate property replacement tax, however, which makes the top corporate rate 10.49 percent under the Senate plan.
The possible tax rates would bring in $3.325 billion worth of new revenue, according to estimates, and would help fix the state's structural budget deficit, proponents say.
Proponents have said 97 percent of Illinoisians would either pay the same or less in income taxes.
When the House approved those rates on Thursday, State Rep. Jay Hoffman, D-Swansea, was among those to vote yes.
"I think we should set the rates and let the public look at what we intend to pass, make it all public so they could all vote knowing what the rates would be," Hoffman said.
The governor did agree to a task force to review ways to bring about property tax relief and to review the causes of high property taxes, in order to secure a swing vote in the House when it agreed to put the constitutional amendment on the ballot.
"Before this goes to the voters, I think we have an obligation to be real and serious about significant property tax reform," said Hoffman, who is a Democratic leader in the House. "I think that burden is the most unfair, the most significantly unfair burden of any taxation we have in our system. I think this can be used as a mechanism for long term reform in the property tax system."
Republicans in the legislature have universally opposed the efforts for a graduated income tax system.
Opponents have called it a "blank check," which would lead to higher tax rates in the future, especially if there is another economic downturn.
"Our friends on the other side of the aisle, they seem to message that raising taxes is almost an act of courage. Raising taxes is the opposite of courage," said state Rep. Blaine Wilhour, R-Beecher City, during a news conference last week. "Real courage would be dealing with the real and substantial underlying issues that are holding our economy in the state of Illinois down.
"Raising taxes in Illinois has become par for the course. The reality is taxes continue to rise but the underlying financial problems continue to get worse. Despite having the highest combined state and local taxes in the nation, Illinois has the third-worst underfunded pension system in America. We have billions of dollars in unpaid bills, and we are among the least prepared state for an economic downturn. We have no rainy day fund."
He argued during the news conference in Springfield that the state needs to stop adding mandates on businesses to help improve the business climate and pension reform.
"Here's the bottom line: This is a blank check from the taxpayers to Springfield politicians. Until we get our financial act together, we shouldn't be asking for more taxpayer money," Wilhour said.
Republicans have argued the progressive income tax would allow Democrats to tax and spend as much as they want.
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"A graduated tax is bad policy for Illinois. The legislation passed today is estimated to take $3.4 billion more out of the pockets of hard-working people in our state," said state Rep. Charlie Meier, R-Okawville. "It will have a negative impact on farmers, small businesses, working families and economic development throughout my district. Chicago politicians have a history of increasing incomes taxes and increasing spending. A graduated tax will only make it easier for politicians to increase income taxes in the future.
"Just last month, our state brought in $1.5 billion more in revenue than estimated. Yet, this year Democrats are planning on spending every dime by creating new programs instead of paying down Illinois' $6.5 billion in unpaid bills. We need to stop the income tax hikes and stop the spending. We have a spending problem, not a revenue problem, which is why I voted against the graduated income tax hike."
Democrats in conservative districts
As the campaigning begins for a graduated income tax, all 118 members of the House of Representatives will be up for election, including Democrats who live in districts where the idea of a progressive income tax may not be popular.
Now that state Rep. Nathan Reitz, D-Steeleville has voted in favor of placing a graduated income tax on the November 2020 ballot, he could face political fallout, political observers have noted.
Reitz replaced Jerry Costello II, a conservative Democrat, who was against a progressive income tax in the state. Costello was appointed to be director of law enforcement for the Illinois Department of Natural Resources.
The Illinois House Republican Organization, the campaign committee for the House Republicans, said polling released by the Illinois Policy Institute showed that a progressive income tax is not popular in Reitz's district in Southern Illinois
Only 22 percent of respondents in the 116th District are in the favor of the measure. The poll found 41 percent of respondents were against the constitutional amendment.
"While only 22 percent support Rep. Reitz's view of putting a constitutional amendment on the ballot -- making it easier to raise taxes -- the newly placed representative still maintains 100 percent support of one key out-of-district constituent: Governor Pritzker," said Jayme Odom, executive director of the House Republican Organization. "It's now apparent the governor pushed out former Rep. Costello to lock up a pivotal tax-hiking vote from the 116th District."
Reitz in a statement after the vote said 99.6 percent of residents in his district would pay either the same or less in property taxes.
"Since taking office, I've made it very clear that my goals have been providing much-needed tax relief to middle-class and working families as a driver to leverage our economy, to create new jobs, and protect critical access to health care," Reitz said. "There has been a lot of misinformation on both sides of this issue, but when you put that aside, the reality is that this plan puts us on a path to provide modest tax relief for a majority of Southern Illinoisans. ... This amendment simply allows voters to make the first decision if our state should change its tax structure. When we talk about investing more in our local communities, our schools, our social services, the fair tax plan deserves to be part of that conversation."
The conservative-leaning Illinois Policy Institute also contended the measure is unpopular in the districts represented by state Rep. Monica Bristow, D-Godfrey, and state Rep. Katie Stuart, D-Edwardsville, both of whom voted "yes" on the graduated income tax bill.
Reitz and Bristow both voted "no" on the bill Thursday that set what the rates would be if voters approved the constitutional amendment.
Stuart, who voted against the 2017 income tax increase, defended her vote on Monday to put the question on the ballot.
"Throughout my time as state representative, I have fought against all new tax proposals, and voted against the income tax hike that took effect in 2017, because I know that local families are being crushed by an unfair tax system," Stuart said. "Working families in the metro-east are struggling, so I supported a fair tax as a necessary first step in building a stronger Illinois by building a stronger middle class."
Stuart argued 98.2 percent of residents in her district would pay less or the same in income taxes under the House plan.
"I supported the fair tax amendment to give local families a say in whether we should continue the status quo of our regressive tax structure, or if we should address our unfair tax system, and call on millionaires and billionaires to pay their fair share," Stuart said.
Bristow had a very close election in November 2018 when she defeated Republican Mike Babcock by 356 votes, which amounted to one percentage point.
Pritzker was grateful for the support of Democrats in tough districts to put the question on the ballot.
"What's interesting in their districts, they did the right thing and very much appreciate their support for the fair tax," Pritzker said at an unrelated news conference on Thursday. "Remember their districts, more than 99 percent of people in their districts are going to get tax relief or pay no more. And so the dollars that we're able to fill the problem in state government and state budget with are also dollars that will come to their district, so it's good for the people of their district that they've done it, supported it, and I very much appreciate it. The fair tax let's remember is all about putting the state on firm fiscal footing for the future to make sure we can balance the budgets in the future."
More TV ads to come
Think Big Illinois, a dark money group launched by a Pritzker ally, had already been running television commercials to build support for a progressive income tax even prior to the Memorial Day vote.
With the amendment question slated for the November 2020 ballot, campaigns with fliers will most likely flood mailboxes and television ads will be seen on the airwaves, leading up to the election, which includes voting for president.
"Now that voters will have the chance to decide in November 2020, Think Big Illinois will make the case that for every corner of the state the fair tax is the way to lift the burden on middle-class families, generate much-needed funding for our schools, and put our state back on the path to fiscal sustainability," said Lara Sisselman, the communications director for Think Big IL. "We believe that when voters across the state know the truth about the fair tax, they'll vote for it on the ballot, and we'll be using all of the tools at our disposal to make that case."
Ideas Illinois, a group that is against the progressive income tax, sent out an email to supporters entitled "They got away with it," as a fundraising appeal to campaign against the constitutional amendment for the next year and a half.
The group has called a progressive income tax a jobs tax, and would further drive people and businesses out of the state.
"Speaker (Mike) Madigan and Gov. Pritzker will say a lot in the months ahead, but what they won't tell voters is that those states who have passed similar methods of taxation have seen job creators flee in droves and passage of this tax will be one more nail in the coffin of the Illinois economy," said Greg Baise, chairman of Ideas Illinois.