Under Fair Tax amendment, wealthiest would pay a greater share
By CARL GREEN
Springfield, IL – Illinois voters will decide next year if the state will make an historic change in its income tax in favor of working people, young people and poor people – by raising taxes on the richest three percent.
The Illinois House last week approved asking voters if the state should switch from its current flat-rate income tax to a progressive tax in which those with higher incomes pay higher rates, called the Fair Tax. The plan was earlier approved by the Senate.
The tax rate proposal will appear on the November 2020 ballot in the form of a constitutional amendment requiring a 60 percent majority to pass. If approved, actual rates will be determined by the Legislature. Current plans are for a top rate of 7.99 percent.
FLAT TAX IS NOT A FAIR TAX
Under the current system, everyone pays the same tax rate, 4.95 percent. That sounds fair, but the reality is lower-income workers end up paying a far higher percentage of combined state and local taxes than the state’s wealthiest residents do because of the effects of sales taxes and property taxes.
The Fair Tax amendment has been one of the top priorities of Gov. J.B. Pritzker, backed by strong Democratic majorities in the House and Senate, and unions including the American Federation of State County and Municipal Employees (AFSCME), teachers’ unions and the Illinois AFL-CIO.
The measure passed on a strict party line vote, with Democrats voting in favor of the amendment and Republicans voting against it.
A separate bill establishing the new rates was passed by the House on Thursday and was being considered by the Senate on Friday. If the amendment passes and these rates are established, taxpayers would pay:
- 4.75 percent on their first $10,000 of income
- 4.9 percent on income from $10,000 to $100,000
- 4.95 percent (same as the current flat rate) from $100,000 to $250,000
- 7.75 percent on income from $250,000 to $350,000
- 7.85 percent from $350,000 to $750,000
- 7.99 percent on all income of individual filers making $750,000 or more and joint filers making $1 million or more
‘I CHOOSE FAIRNESS’
Pritzker thanked Legislators for their support and said the amendment will be crucial to the state finally getting its financial affairs in order. “As Illinois faces down a multi-billion-dollar budget deficit into the foreseeable future, we cannot do nothing,” he said. “I choose fairness, and I believe that Illinois will, too.”
Under the Fair Tax plan, 97 percent of taxpayer would pay the current rate or less. The remainder, representing those with incomes of more than $250,000, would pay higher rates. That could give the state an additional $3 billion a year or more to pay its bills and invest in its future.
METRO-EAST REPS BACK THE PLAN
The Metro-East is represented in the House by five Democrats who all voted for the amendment. “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,” said Rep. Katie Stuart (D-Edwardsville).
She said that in her district, less than two percent of residents will pay higher taxes. “The Fair Tax plan is a critical first step to help balance the state budget, invest in a growing economy that creates high-wage jobs and move Illinois forward after four years of partisan gridlock.”
The House’s newest member, Rep. Nathan Reitz, (D-Steeleville), in nearby Randolph County, cast one of his first votes for the amendment.
“There has been a lot of misinformation on both sides of this issue,” Reitz said. “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 about whether 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.”
PROPERTY TAX RELIEF FOR WORKING FAMILIES
Part of the plan is aimed at providing some relief on the ever-expanding property tax bills paid by working families. The overall package creates a Property Tax Relief Tax Force that will seek to determine why property taxes are so high in Illinois and propose ways to bring some relief. The final report is due by the end of this year.
The bipartisan task force will include members from the House and the Senate, appointed by legislative leaders and the governor.
“For too long, families across Illinois have struggled under too-high property tax burdens and an unfair income tax system that protects the wealthiest,” Pritzker said. “This task force is a common-sense addition to the Fair Tax, which aims to protect the middle-class and those striving to get there, while those making $250,000 and above pay more.”
According to the Arlington Heights Daily Herald, which covers he northern, northwestern and western suburbs of Chicago, most of the new revenue under the Fair Tax plan would be paid by residents of Chicago and its suburbs, using Department of Revenue data.
The newspaper said 85 percent of taxpayers subject to the higher rates are from the Chicago area, where all 13 of the state’s billionaires live and average incomes exceed $250,000. Downstate, the paper said, where about 35 percent of the state’s population lives, just 15 percent of the taxpayers who would be subject to the increase.