* Greg Hinz…

A war of statistics has broken out over a proposal to institute a graduated income tax in Illinois, with varying camps presenting it as a battle between “fairness” and a potential business flight from the state.

Both sides [yesterday] offered a flood of competing facts, figures and charts—all accompanied by lots of spin—with one group contending that the plan would give Illinois the third-worst business tax climate of the 50 states. […]

At issue, as previously reported, is a pending bill by Rep. Lou Lang, D-Skokie, to revamp the state’s current 3.75 percent individual income tax. The rate in the lowest bracket would go down to 3.5 percent, enabling Lang to contend that “99.3 percent” of individual filers overall would pay less. But the rate would soar to 8.75 percent for income above $500,000 a year for individuals ($750,000 for married couples filing jointly) and a cool 9.5 percent for income above $1 million a year for individuals ($1.5 million for joint filers). […]

In a report and at a Springfield news conference, [the Tax Foundation] said owners of small businesses, who often just “pass through” their business income to their personal tax return, will be put at a huge disadvantage relative to other states. In fact, they note, since pass-through businesses also have to pay the state’s 1.5 percent corporate personal property replacement tax, the combined top rate would be 11.25 percent—higher than any other locale except California and New York City, and higher than the combined 7.75 percent paid by big C corps.

Greg thinks the truth is somewhere in the middle, but I think the Tax Foundation’s numbers make the case that a relatively tiny number of people will take a big hit.

* But the group is also misleading as heck. Check out this bit of Tax Foundation “analysis”…

Despite the more than $30 billion raised by the temporary tax increases, Illinois still has over $7.2 billion in unpaid bills

That mountain of unpaid bills was a whole lot lower before the tax hike partially expired. And it’s that high now because the tax hike expired, not “despite” the 2011 tax hike.

I mean, really. C’mon, people.

* Read on…

Of particular note, the companies responsible for over half of all small business income would be subject to a top marginal rate of 11.25 percent, which is significantly higher than Illinois corporate income tax rate of 7.75 percent. Even businesses with income above $500,000 but not more than $1 million would pay more as pass-through entities than they would under the corporate income tax were this plan adopted. The table below gives a sense of how many Illinois small businesses would be adversely affected by the tax increase, and the percentage of total pass-through AGI they represent.

The table…

So even the Tax Foundation admits that just 8.31 percent of pass-through business owners would pay more - and that could be way off because if those business owners are married then the tax hike wouldn’t kick in until $750,000.

* Rep. Lou Lang…

“The majority of Illinois small businesses in Illinois, 73% are pass through entities and pay the individual income tax rate and over 90% of those businesses have an adjusted gross income of $200,000 or less. All of those small businesses would get a tax cut under my plan.”

The reality is that a comparatively tiny number of pass-through business owners (12,330, according to the Tax Foundation - roughly the size of a single Springfield ward) make up a very large (51.94 percent) chunk of total adjusted gross income in this state. Those are the owners who would pay the most. They are at the center of this argument. And they are also making a whole lot of money. That’s not a bad thing. It’s just a fact.

* And speaking of which…

.@ingramlaw @StateRepLouLang’s narrative around his $2 billion tax hike is even worse pic.twitter.com/QDf1HNQDYF

— Illinois Policy (@illinoispolicy) April 27, 2016

The small number of people who would pay more are, indeed, Illinoisans. Rep. Lang should know better.