Illinois citizens pay a lot of taxes, but on election day heads of state beg its residents to allow them to tax them even more.
The current state ranks seventh nationally in sales taxes and second in property taxes. But Illinois is one of 11 states to have a flat tax rate for all residents, regardless of income bracket. This rate is 4.95 percent. Democratic leaders, led by Governor JB Pritzker, want to change the flat tax to a progressive income tax in order to raise the rate for the state’s wealthiest citizens.
State lawmakers already approved a bill for this transition in June 2019. Their proposed progressive tax system would slightly reduce taxes for people earning less than $ 100,000 a year, but significantly increase the rate. taxation for those who earn more than $ 250,000 per year at 7.75 percent at a minimum.
Having a flat tax is enshrined in the state’s constitution, so lawmakers must get voters to approve a rewrite in order to actually implement the tax change. Voters will therefore consider the SJR1 referendum, officially titled “Illinois allows progressive tax amendment.“Pritzker is not only the main spokesperson for the amendment, he is also by far the biggest funder of the amendment, contributing more than $ 56 million to committees pushing for its passage.
Pritzker calls it a “fair” tax and says 97% of Illinois residents will see their income tax cut with the new rates. He even set up a tax calculator to let people see what they would save. It is all presented as a plan to get more money from the wealthiest in the state.
Under Illinois constitutional referendum rules, to pass, 60 percent of people who vote on the referendum must say Yes, or more than 50 percent of all voters who voted must approve it.
Here is the problem. Voters are not actually voting to implement Pritzker specific tax numbers. In fact, they are simply voting to give lawmakers the power to set progressive tax rates. It turns out that Pritzker and the lawmakers have this particular plan that will be implemented if the vote passes. But those numbers will not be set in stone in the constitution. This referendum gives lawmakers the power to continue to adjust and, of course, increase these tax rates.
A single person earning $ 50,000 per year will save $ 39 per year under this new tax system. It’s not a lot of savings in exchange for giving lawmakers the power to raise tax rates in subsequent years. The nonprofit Illinois Institute of Policy (who pursues on what they claim to be a misleading description of the referendum) examined what happened when Connecticut went from a flat tax to a progressive tax, and he trigger red flags:
Claims that the middle class won’t see an increase might be true at first, but middle class taxes have risen 13% in Connecticut since moving from a progressive tax to a flat rate – the only state to do so in the past 30 years. The middle class is where the bulk of taxable income is, and Pritzker previously made spending pledges worth $ 10 billion on a $ 3.7 billion tax before COVID-19 is digging a $ 4.6 billion hole in state revenues. In addition, only $ 200 million of the new tax is expected to go to the state’s No.1 fiscal threat – rising pension costs.
Illinois still has huge unfunded retirement issues looming. Between 2001 and 2009, according to data collected by the Reason Foundation (the non-profit organization that publishes this site), the state of state government employee pension funding has increased from 70% to 51%. And the loss of income from travel and tourism in Illinois due to COVID-19 partly explains this hole in state revenues.
Illinois is in desperate need of the money to meet its retirement obligations and debts. Unsurprisingly, this fiscal referendum is endorsed by all the major civil servants’ unions.