Illinois Cultural Issues

Front Page Article

"Graduated, Progressive, Variable Tax Structure" by Joyce Geiler
   Illinois currently has a modified flat or unified income tax structure, not a graduated, progressive or variable structure. A change to the Illinois Constitution is necessary for the adoption of progressive income tax rates proposed by Gov. J.B. Pritzker and which he calls a “fair” tax. A progressive income tax structure would allow higher income earners to be taxed at higher rates. The Illinois Senate and House have passed the necessary legislation (along party lines) to place a referendum on the November 2020 ballot, and Gov. Pritzker is expected to sign it if he hasn’t already by the time this newsletter is released. Because it regards a possible constitutional amendment, the bill required a supermajority to pass to advance to voters. This presented no problem for the Democratically-controlled Illinois Congress.
     The actual tax rates will be left to agreement of Governor Pritzker, Speaker Mike Madigan, and Senate President John Cullerton and will not be part of the language voted on by voters in the 2020 General Election, per the proposal passed by Illinois Democrats.
     In his opposition to the referendum, State Rep. Andrew Chesney, R-Freeport, said the proposal would lower taxes for the working poor by less than $7 a year, not enough to buy a sandwich at a restaurant. For those making less than $100,000, Chesney said they’d save less than $38. “That’s a heck of a negotiation, but the $37.38 will be erased when the Democratic majority passes the gas tax,” Chesney said. Read more here.
Indeed, Illinois legislators did double the gas tax from 19 cents to 38 cents per gallon beginning July 1. That makes the state one of the highest in the nation for taxes at the pump. Drivers will also see a $50 annual increase in vehicle registration fees for most vehicles starting in 2020.
     How does Illinois compare with other states regarding flat vs progressive income taxes?
The United States has a progressive federal tax system, which applies higher tax rates as one’s income increases. The majority of states follows the federal example, and each state employs its own version of a progressive income tax system. Thirty four of the fifty states have progressive income tax systems as does the District of Columbia. The rates are set at much lower percentages than the 10 to 37 percent federal income tax brackets. States with low income tax rates, such as North Dakota and New Mexico, have rates between 1 and 6 percent. The high-income tax states like California, Hawaii and New York have top brackets in the 9 to 11 percent range.
     Some states -- Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming -- don't collect any income taxes. That essentially means they use the opposite of a progressive tax system. New Hampshire and Tennessee don't have income taxes on earned income. They do apply a flat income tax rate to interest and dividend income. Illinois, Indiana, Massachusetts, Michigan, Pennsylvania, Colorado and Utah use a flat tax system where everyone pays the same percentage regardless of income.
     Even states with flat income tax rates have progressive features. With certain income brackets, one can pay deductions and exemptions before paying any income taxes. As a result, it is possible to end up in a zero percent bracket for the lowest levels of income, and the flat tax rate bracket if income exceeds the level of deductions or exemptions.  More information here.
Since Illinois has more than a year before the referendum appears on the November 2020 ballot, one can be certain to be inundated with information from supporters and from those opposed to the proposal. Expect some information to be factual, some not.
     America’s founders rejected the income tax entirely; but when they spoke of taxes, they recognized the need for uniformity and equal protection to all citizens. The next newsletter will explore the history of taxes in the United States, which of course, set the precedent for Illinois.
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