* Senate President Pro Tempore Don Harmon has had to take some votes this year that might not match up well with his very liberal Oak Park-based district. However, he did introduce this constitutional amendment on the last day of session…
Proposes to amend the Revenue Article of the Illinois Constitution. Removes a provision that provides that a tax on income shall be measured at a non-graduated rate. Provides that there may be one tax on the income of individuals and corporations, that this may be a fair tax where lower rates apply to lower income levels and higher rates apply to higher income levels, and that no government other than the State may impose a tax on or measured by income. Effective upon being declared adopted.
[NOTE: I linked to an earlier version of the proposal. The above is now the correct one. Sorry.]
* Daily Herald…
State Sen. Don Harmon, an Oak Park Democrat and a top member of his party’s leadership team, is behind the proposed amendment in the Illinois Senate. He says as the state’s 2011 income tax hike is set to expire, it’s inevitable that lawmakers will be talking taxes soon.
“I think we have to build momentum,” Harmon said. “It will inevitably be part of the debate.”
* Several Democratic House members introduced their own progressive income tax proposal on May 31st…
Proposes to amend the Revenue Article of the Illinois Constitution. Removes a provision that provides that a tax on income shall be measured at a non-graduated rate. Provides that there may be one tax on the income of individuals and corporations, that this may be a fair tax where lower rates apply to lower income levels and higher rates apply to higher income levels, and that no government other than the State may impose a tax on or measured by income. Effective upon being declared adopted.
* Back to the Daily Herald…
State Rep. David McSweeney, a Barrington Hills Republican, has amassed 46 opponents to a graduated income tax in the Illinois House, two short of the number he needs to eventually block it. He says he’s still looking for two more.
“I’m going to work it nonstop,” McSweeney said.
The battle over taxes could be the biggest budget challenge lawmakers face next year, perhaps bigger than the ongoing pensions battle. The income tax hike is set to expire in January 2015, halfway through the state’s budget year.
My own opinion is that they could probably pass this in the Senate, but the prospects in the House may be dim. As usual, Speaker Madigan is gonna want some Republican votes, and those probably don’t yet exist.
…Adding… It’s not clear from the DH story posted above, but Rep. McSweeney has a House resolution opposing a graduated income tax, HR 241. It has 46 co-sponsors…
States the belief that the Illinois Constitution should not be amended to permit a graduated income tax.
- PublicServant - Friday, Jun 7, 13 @ 10:03 am:
Well, with the Martire, CTBA, graduated income tax plan, income taxes on 94% of Illinois taxpayers, those whose base income is under $150,000, would receive a tax cut. It would also raise an additional 2.4 billion in new revenue, while keeping the effective state income tax rate for Illinois millionaires at just 4.3 percent. Lastly, by putting more money in the pockets of those residents who cannot afford to save that additional money, this graduated tax proposal will stimulate private sector growth through increased consumer spending thus creating an estimated 36,000 private sector jobs.
With the facts regarding the CTBA plan known to the public, that ought not be that hard for a reasonable legislator to get behind really. It doesn’t even require heavy lifting.
- facts are stubborn things - Friday, Jun 7, 13 @ 10:11 am:
Heck, don’t let the constition get in the way. Declare an emergency and pass whatever tax law changes you wish. After all, who knows how the courts will rule. Use the same logic that is being used on pnsions and lay out an 8 page preamble as to why Illinoios has a revenue crises.
- hisgirlfriday - Friday, Jun 7, 13 @ 10:15 am:
I have read that Harmon bill excerpt 3 times and I keep reading it as saying he wants to lower corporate tax rates. Not sure how that helps him with Oak Park liberals.
- Chicago Cynic - Friday, Jun 7, 13 @ 10:19 am:
I’m curious to see what the rationale is for opposing a graduated income tax. Illinois is absurdly regressive, and even though I’ll have to pay more, that seems only fair.
- Anon - Friday, Jun 7, 13 @ 10:19 am:
This has been a long time coming. With the high cost of living in IL its horrible to tax the first $10,000 of anyones income. The idea that taking 5% of a person’s adjusted gross income of $20,000 vs $2,000,000 is fair is patently absurd and mean spirited. All the neighboring states have progressive state income taxes.
Remember everyone pays the same rates. A 9% top marginal rate means you only pay 9% on income in that bracket, you are paying the lower rates on income in the lower brackets. Far to often people mistakenly believe you 9% on all your income.
Take, for example, a single taxpayer making $175,000. That total puts that filer in the 33 percent federal tax bracket, but he doesn’t pay 33 percent on the whole $175,000.
He pays 10 percent, 15 percent, 25 percent, 28 percent and 33 percent on that money based on the amounts that are covered by the tax brackets.
The bottom line is that this hypothetical taxpayer doesn’t owe the IRS $57,750, which is 33 percent of $175,000.
Rather, he owes Uncle Sam $42,622, which is an effective tax rate of around 24 percent. This is because parts of his earnings are also taxed at rates lower than his top, marginal tax rate of 33 percent.
Most lower income people would actually get a tax cut in a progressive system, which would help stimulate the economy as lower income people tend to spend 100% of their earnings just to survive. Cutting the tax rates for Bruce Rauner will do nothing if he funnels that money overseas in some Caiman island tax shelter.
- Chi - Friday, Jun 7, 13 @ 10:21 am:
Rationale for opposing a graduated income tax:
Rich people give more to campaigns than poor people. Rich people don’t want a graduated income tax.
- Downstate - Friday, Jun 7, 13 @ 10:22 am:
Yep, let’s increase taxes. Here’s a great web site that shows the migration of money, based on AGI’s, out of each county of Illinois.
http://www.howmoneywalks.com/web-app/
We thought our downstate county was really doing better, but realize from the information, that we are losing wealth fairly dramatically.
It’s a shocking wake up call. Increasing taxes will only make this worse.
- PublicServant - Friday, Jun 7, 13 @ 10:23 am:
Rationale for Rich people to support a graduated income tax:
Rich people make more income when consumer spending increases. Rich people should back it whole-heartedly, but, hey, why let facts get in the way of ideology.
- RonOglesby - Friday, Jun 7, 13 @ 10:32 am:
Wont fix anything.
- OneMan - Friday, Jun 7, 13 @ 10:34 am:
The nice thing about a graduated rate is it can be a tax on other people..
Raise the rate on people that make X where X is greater than what you make…
- Chi - Friday, Jun 7, 13 @ 10:36 am:
Public Servant-
I agree with you, but I don’t think a majority of rich people do.
- RonOglesby - Friday, Jun 7, 13 @ 10:39 am:
@One Man
what you said. +1
- Anonymous - Friday, Jun 7, 13 @ 10:44 am:
Hisgirlfriday - there’s a certain logic to the proposal. Right now, the constitution caps the corporate rate at 8/5ths the individual rate (although it is currently less than that). If you have a graduated rate, where you anticipate significantly raising the highest individual rate, should the 8/5ths apply to the lower rate or the highest rate. If the later, it could get very, very high. If the former, it could be lower than the highest individual rate. The common sense solution - cap it at the highest individual rate. This could well allow for a corporate tax increase, assuming the highest individual rate in a progressive tax system was more than 8/5ths the lowest.
- RonOglesby - Friday, Jun 7, 13 @ 10:53 am:
@Anon
Lets take your hypo farther. lets take that 24% add on to it 5 or 8 % of an Illinois progressive tax, etc. easy to see someone getting to 30 or 40% paid in income taxes. Like in NYC or Cali some folks paying 40% or more of income in income taxes.
Just as a philosophical argument, what % of someone’s income is government (at all levels) entitled to. What is the fare share? 20%? 40%? 50%?
- PublicServant - Friday, Jun 7, 13 @ 10:59 am:
People don’t flee due to higher taxes.
http://www.nbcchicago.com/blogs/ward-room/Why-Higher-Taxes-Dont-Cause-People-To-Move-148259425.html
- Kana - Friday, Jun 7, 13 @ 11:03 am:
The CTBA report shows marginal tax rates at 5% for anyone $5- 100K (rather than 3.75%). Then it raises them even more for everyone higher, i.e. $100- 150K would be 7.5%. This will not be a tax cut for most Illinoisans, it would be an increase. Remember, the rate is set to go to 3.75%.
Also, this will give legislators far more freedom to raise rates whenever they need more money, b/c they are impacting fewer people. If you represent a relatively poor- mid income district, why not keep raising taxes on those greedy rich people or the evil corporations. Problem is that it is a lot easier for these people to leave than it is the poor.
CTBA has been very clear they believe IL does not have a spending problem, but needs more taxes eventhough we have record revenues. Why would they push for anything other than higher taxes?
- steve schnorf - Friday, Jun 7, 13 @ 11:08 am:
and don’t forget the Illinois income tax is deductible on the federal tax, so in those highest brackets around a third of what you pay in Illinois taxes will come right off your federal tax bill.
- Kana - Friday, Jun 7, 13 @ 11:08 am:
Why would we give IL govt more of our money, when they already are taking 67% more of it, have record revenues, and still can’t get anything under control. For God’s sake, the “April surprise” was seen as the best thing to happen this session b/c they didn’t have to make the cuts.
- Anon - Friday, Jun 7, 13 @ 11:12 am:
@ Downstate, a progressive tax would lower taxes for some and raise them for others, its demonstrably false that is a uniform hike across the board.
- PublicServant - Friday, Jun 7, 13 @ 11:13 am:
Kana, 94% of Illinois taxpayers will be giving IL govt less of their money, and that means you, assuming you make less than $150,000/yr.
- Anon - Friday, Jun 7, 13 @ 11:17 am:
@ RonOglesby, are you saying the economic and social effects of a 5% tax on your first dollar is the exact same as 5% tax on your two millionth dollar?
- Downstater - Friday, Jun 7, 13 @ 11:17 am:
Progressive income tax! Nothing like giving folks a reason to move out of the state.
- davidh - Friday, Jun 7, 13 @ 11:19 am:
As one of McSweeney’s constituents I had pretty low expectations of him but I didn’t expect to see him leading this parade. Honestly, the only silver lining in the pension stalemate is that it gives further opportunity for Martire, etc. to explain that what Illinois faces is a structural revenue shortfall, not a “rich” public servant or excess government spending problem. I’m happy to to see the debate move into a discussion of what constitutes tax fairness.
- Downstate - Friday, Jun 7, 13 @ 11:24 am:
Anon,
We are seeing the problems of the state play out in a microcosm down here. More and more of the high income earners are moving their residence out-of state. Illinois has recently changed the law to make it more difficult to declare out-of-state residency. (Of course they wouldn’t be making the change, if they didn’t think the migration was a problem).
Economist yesterday said that federal and state deficits could be solved almost overnight if we simply moved toward 4% economic growth. Let’s not focus on taxes, but rather what are we doing to spur economic growth. There are a host of federal and state laws that I deal with that directly impact the ability to grow, expand and add jobs. Keep adding more laws and regulations and the deficits will never be solved. You can’t tax your way to prosperity.
- Anon - Friday, Jun 7, 13 @ 11:29 am:
The premise that Springfield needs more money is untenable. Why not focus on policies aimed at lowering unemployment? Another tax grab isn’t going to improve the perception that Illinois is openly hostile to employers & small businesses. The notion that the state of Illinois simply cannot function on
- Anon - Friday, Jun 7, 13 @ 11:30 am:
less than $33B is ludicrous
- davidh - Friday, Jun 7, 13 @ 11:36 am:
== The premise that Springfield needs more money is untenable. ==
How? What public services do you want to give up? Should we walk away from maintaining our transportation infrastructure? Cash in our chips on public education? Neither would be particularly beneficial to employers and small business.
- Kana - Friday, Jun 7, 13 @ 11:36 am:
PublicServant, I just don’t trust CTBA’s claims. It is a fairy tale and wishful thinking to claim that raising taxes on 6% of taxpayers and lowering them on 94% will result in more revenue for the state. This doesn’t work w/o higher rates on middle class taxpayers.
And God forbid a few of those 6% taxpayers relocate… we’d really but up the creek.
- RonOglesby - Friday, Jun 7, 13 @ 11:45 am:
@Anon,
that is not what I was saying, I asked you a philosophical question about “Fair share”. Calls for increased taxes on one group of individuals vs another is often couched in “fairness”. So back to the original question:
—
Just as a philosophical argument, what % of someone’s income is government (at all levels) entitled to. What is the fare share? 20%? 40%? 50%?
—
- RonOglesby - Friday, Jun 7, 13 @ 11:46 am:
“fair share” sorry idiot between the keyboard and chair.
- Reader - Friday, Jun 7, 13 @ 11:48 am:
@PublicServant
- Heck, if I can pay less while making someone else pay more, then it MUST be good policy for the entire state! No more convincing needed!
- Anon - Friday, Jun 7, 13 @ 11:58 am:
If taxes will purportedly go down on “94%” of taxpayers, how much will the remaining 6% have to pay in order for overall revenue to increase? To echo Ron, what’s “fair”?
- Roadiepig - Friday, Jun 7, 13 @ 12:01 pm:
Logical, because those who benefit most (earn more) from the infrastructure and properly educated employees (um..the richest) pay a higher percentage than the poorest, who now pay the same percentage as the richest. Also brings us inline with our neighboring states ( you know, the ones who have higher rates and progressive taxes, and that some folks here keep promising to move to). So- it’s not going to happen
- RonOglesby - Friday, Jun 7, 13 @ 12:01 pm:
@Anon
see you still wont answer the question. Capital (any money) is not the property of the state. It first has to be collected from individuals.
So first question again:
—
Just as a philosophical argument, what % of someone’s income is government (at all levels) entitled to. What is the fair share? 20%? 40%? 50%? of anyone’s income.
—
- Formerly Known As... - Friday, Jun 7, 13 @ 12:25 pm:
It might be worth considering as a replacement once the “temporary” income tax hike expires.
Perhaps as a trade.
Let the “temporary” income tax expire, lowering taxes for those in the lowest brackets, and replace it with a graduated income tax.
Food for thought.
Either way, we’ve got a big budget hole coming up when that tax hike expires and the sooner we begin discussing viable ways of addressing it, the better.
- Formerly Known As... - Friday, Jun 7, 13 @ 12:35 pm:
Some interesting background is at: http://illinoisissues.uis.edu/archives/2012/04/ends.html
“From 1971 to 2007, 14 amendments to allow graduated rates were introduced, only to die in committee. Since then, another 14 have been offered, and two actually made it to losing floor votes, both in 2008.”
- PublicServant - Friday, Jun 7, 13 @ 12:40 pm:
Here’s the link to the bi-partisan (ask Steve Schnorf) CTBA’s Graduated Income tax proposal:
http://www.ctbaonline.org/New_Folder/Budget,%20Tax%20and%20Revenue/CTBA%20Graduated%20Income%20Tax%20FINAL%20Report%20Feb%202012.pdf
Figure 7 shows the effective tax rates paid at various income levels under the existing 5% flat tax and the graduated income tax proposed.
In addition, Figure 6 show’s what Illinois Income tax revenue would be when other state’s graduated income tax rates were applied to Illinois taxpayers.
Notice, finally, that CTBA’s figure of 2.4 billion in new revenue takes into account additional tax avoidence measures as well as any out-migration that would occur reducing new revenue from 3.36 billion to the reported 2.4 billion.
You can certainly believe what you want, but I think reasonable people, including Illinois legislators, would have trouble taking issue with the CTBA numbers.
- Small Town Liberal - Friday, Jun 7, 13 @ 1:10 pm:
- so in those highest brackets around a third of what you pay in Illinois taxes will come right off your federal tax bill. -
A welcome way in which we could claw back a few of the billions of Illinois dollars we export to tax eating states around the country. This has been needed for a long time, hopefully the time has come.
- Ray del Camino - Friday, Jun 7, 13 @ 1:14 pm:
That “what percentage is fair” argument is a tar baby that doesn’t have anything to do with anything. Nor is it a “taxing and spending” argument. We are already spending/have already spent it, on government services that people demand. Raising revenues is simply about paying our bills and being honest about it. And rates do/should go up on wealthier people because that’s where the money is.
- Anon - Friday, Jun 7, 13 @ 1:16 pm:
“More and more of the high income earners are moving their residence out-of state. ”
Do you have any proof of this? According to the this website:
http://www.investopedia.com/financial-edge/0511/top-9-states-with-the-most-billionaires-.aspx
Il ranks 5th in the nation in the number of billionaires in 2011, and two of the states ahead of us (NY & CA) have subtantially higher progressive tax rates then IL does. That sort of torpedo’s the assumption that the wealthy will flee in droves because of progressive tax rate.
- RonOglesby - Friday, Jun 7, 13 @ 1:19 pm:
@Ray
–
That “what percentage is fair” argument is a tar baby that doesn’t have anything to do with anything.
And rates do/should go up on wealthier people because that’s where the money is.
–
so it doesn’t matter if the rate is 5% or 90% on wealthy people then correct? there is no fair share then other than what the people decide to tax then? so 95% of the people could (and should in your words) tax 5% of the population to pay for whatever programs the 95% want?
Again, what is the fair share? you say it doesnt matter because the collective has decided that the wealthiest should pay whatever the group decides. So there is no “fairness” on the wealthy side. there is no limit. There is only fairness in not taxing in the opposite direction.
got it. Thanks.
- Downstate - Friday, Jun 7, 13 @ 1:27 pm:
Anon at 1:16,
There are approximately 442 billionaires in the US. By comparison, there are 9 million millionaires.
You only need to look at the web site: http://www.howmoneywalks.com/web-app/
to realize that wealth is fleeing Il, NY and California for other locales.
If wealth migration is not a problem, then why is Illinois stiffening the requirements for out of state residency?
- Formerly Known As... - Friday, Jun 7, 13 @ 1:37 pm:
I am asking this, no snark:
Has Martire ever suggested a budget cut?
I have been following the CTBA’s work for years and cannot recall them ever advocating for anything other than tax increases.
Nor do I recall them ever opposing a tax increase or remaining neutral on one.
It sort of hurt his credibility as an objective party when that realization hit.
- Formerly Known As... - Friday, Jun 7, 13 @ 1:52 pm:
Martire has been described by some on CapFax as “irrepressible”. That sounds about right.
Sure enough, the CTBA supports or has supported:
- increasing the state sales tax
- increasing the state income tax
- increasing the state corporate income tax
- increasing the estate tax
- creating a Gross Receipts Tax, at least until deciding that the so-called “tax swap” would have an easier time passing
- amending the Constitution to implement a “progressive” tax system
- etc., etc., etc.
It seems safe to say we know where the CTBA stands.
If there is a tax to increase, they support it.
- Hilariously - Friday, Jun 7, 13 @ 2:16 pm:
we have a “progressive” income tax NOW!
Those who make less pay less and those who make more pay more. What “progressives” really want is ARBITRARY taxation authority.
- facts are stubborn things - Friday, Jun 7, 13 @ 2:29 pm:
@Hilariously - Friday, Jun 7, 13 @ 2:16 pm:
The definition of progressive: Happening or developing gradually or in stages; proceeding step by step.
The very nature of a progressive system is those who earn more pay at a higher rate. It is the way to take advantage of the rise in incomes to produce sufficiant revenue to fund what is a blue state. We have a structual deficit. This in it’s simplist form is because we tax like a red state and spend like a blue state.
- Mr. Keynes - Friday, Jun 7, 13 @ 3:04 pm:
@formerly - if an ad hominem attack on Mr. Martire is sufficient, I guess you’re golden. But what would serve you better would be an honest analysis of the CTBA tax proposal. Since Illinois ranks 39th out of all the states in spending per capita, I’m not sure that bodes well for the spending is the problem argument.
- jake - Friday, Jun 7, 13 @ 3:38 pm:
Some facts about income distribution in Illinois.
The top 1% incomes in Illinois average over $2 million per year. The total income of that top 1% is greater than the bottom 60% combined. The overwhelming majority of the top earners are in Chicago and suburbs (see http://wealth.mongabay.com/cities/ILLINOIS.html )
The overwhelming majority of those top earners can’t make nearly that much money in any of the surrounding states, in which the top 1% earns on average between $700,000 and $800,000. For similar wealth-creating opportunities they would have to go to New York or Los Angeles, where they would find high-tax environments. Any downstate legislator who defends flat tax deserves to be beaten up by an opponent for not representing the interests of his or her constituents.
- J - Friday, Jun 7, 13 @ 3:42 pm:
==I think reasonable people, including Illinois legislators, would have trouble taking issue with the CTBA numbers.==
Are you serious? CTBA effectively admits in the paper that their plan imposes a tax hike on anyone earning more than $5,000 per year.
Let me ask you a question: if current law says that the tax rate will be 3.75% (and gradually decrease during the next several years) and a plan instead says you’ll pay 5-11%, is that plan a tax cut?
Because that’s what CTBA’s plan does. In the tables you cite, note how they are not comparing their plan to the statutory tax rates.
If you want to raise taxes, fine. Say that. But stop pretending this is a tax cut when you know full well that it’s not.
- Rod - Friday, Jun 7, 13 @ 3:44 pm:
I support Senator Harmon’s amendment. I understand the CTBA graduated income tax plan and it’s logical. But I believe that if such a constitutional amendment did pass for at least 5 years or so there should be no tax reduction at all for those making under $150,000 a year. So rates should be kept at the current level.
Illinois needs to make up ground fast, particularly in relation to our infrastructure and education. We also need to pay off bonds when ever possible early to avoid interest payments.
While the CTBA plan would raise an additional 2.4 billion in new revenue our state needs for a short period of time more money than that. If the economy heats up and incomes rise significantly in our state then those making $150,000 or less should benefit from a tax reduction earlier than five years as long as the revenue stream remains high.
- Ray del Camino - Friday, Jun 7, 13 @ 4:08 pm:
@Ron Oglesby–
“you say it doesnt matter because the collective has decided that the wealthiest should pay whatever the group decides”
Where did I say that?
What I’m saying is that we have to pay our bills. Money already spent. Go to a fancy restaurant or a car dealer and try that “what percentage is fair” argument on them. What you decide is “fair” and what the next guy decides is “fair” is irrelevant. It costs what it costs.
Now go make up another straw man that you say I said, when I didn’t, and go argue against that.
- RNUG - Friday, Jun 7, 13 @ 4:22 pm:
The CTBA plan was developed using IDOR information. I don’t know exactly how he talked them into it, but Martire got IDOR to model his proposals using their actual data, including their assumptions on tax evasion and wealth flight.
So those numbers are as good as you are going to get when it comes to estimating the impact of a tax policy change.
The actual progressive income tax proposal will lower most people’s rates and taxes.
The other CTBA proposal, which will raise taxes, is to extend the sales tax to services. That proposal is coupled with a suggested increase in the standard deduction to offset the impact of that service sales tax on lower incomes.
Ralph Martire spoke at the RSEA meeting a couple of weeks ago. Anyone who attended and requested it received a pdf copy of his powerpoint slides.