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It’s not 4.95 percent, it’s 5.81 percent for the rest of this year

Wednesday, May 24, 2017 - Posted by Rich Miller

* WTTW

Under the Senate plan, which passed Tuesday on a partisan vote of 32-26, the [income] tax rate would nearly return to what it was: Illinois residents are looking at paying a rate of 4.95 percent on their income taxes. Corporations would see their taxes rise, too, with the rate edging from 5.25 percent to 7 percent.

Both hikes would be retroactive, going back to January.

* Illinois Policy Institute

Because the income tax hike is retroactive to Jan. 1, 2017, personal income taxpayers will pay an effective tax rate of 5.81 percent on their earnings for the remainder of the year.

The reason it’s backdated is because the grand bargain was originally designed in January to fix the hole in Fiscal Year 2017, the current fiscal year. So the plan all along has been to make it retroactive to January 1st.

That would’ve been no problem if the grand bargain had passed in January or February, but Gov. Rauner demanded the Senate fix the Fiscal Year 2018 hole as well and then punted the problem to the chamber during his February budget address. And when Rauner derailed the package on March 1st it took almost two more months to patch something together, and by then it was a partisan plan.

So, more delays will mean an even higher effective tax rate for the rest of this calendar year unless they simply write off FY 17 like they already have with FY 16.

       

24 Comments
  1. - Chicago Cynic - Wednesday, May 24, 17 @ 1:32 pm:

    And if they don’t act now, it’s going to be far higher than that the next time they do.


  2. - 95th Resident - Wednesday, May 24, 17 @ 1:32 pm:

    Here it comes…3….2…1….”the Democrats want to raise your taxes 55%!”


  3. - RNUG - Wednesday, May 24, 17 @ 1:32 pm:

    == unless they simply write off FY 17 like they already have with FY 16. ==

    With $14B in backlogged bills, you can’t easily write of FY17.


  4. - Free Set of Steak Knives - Wednesday, May 24, 17 @ 1:32 pm:

    === unless they simply write off FY 17 like they already have with FY 16 ===

    Radogno was right when she said the end of February was the deadline for getting a bipartisan deal passed that the Governor could sign.


  5. - Free Set of Steak Knives - Wednesday, May 24, 17 @ 1:34 pm:

    === With $14B in backlogged bills, you can’t easily write of FY17. ===

    You can bond out $10B to pay off the debt, just as we did with pension obligations.


  6. - Reality Check - Wednesday, May 24, 17 @ 1:36 pm:

    If it’s 5.81 for the rest of the year and 4.95 after that, then it follows that everyone who voted for it supported a tax cut starting 1/1/18, and everyone against it opposed the same cut.

    (Snark, kinda, although I’ve seen mail based on much less.)


  7. - AC - Wednesday, May 24, 17 @ 1:37 pm:

    ==You can bond out $10B to pay off the debt, just as we did with pension obligations.==

    I think the strategy is: let’s wait until the state has junk bond status before we bond more money!


  8. - unclesam - Wednesday, May 24, 17 @ 1:38 pm:

    ==You can bond out $10B to pay off the debt, just as we did with pension obligations.==

    Ahh, the glory days of Blagojevich…


  9. - Montrose - Wednesday, May 24, 17 @ 1:38 pm:

    Essentially what IPI is pointing out is that the longer we wait to bring in new revenue, the more it costs us. That is great irony from an organization that thinks we will be fine if we do nothing on revenue.


  10. - 47th Ward - Wednesday, May 24, 17 @ 1:39 pm:

    That’s what Cullerton was saying way back in February, that because of the retroactive nature, they needed to pass it asap. But Rauner killed the deal back then, and here we are.


  11. - Mama - Wednesday, May 24, 17 @ 1:42 pm:

    Rich, why is Rauner against passing a budget?


  12. - Oswego Willy - Wednesday, May 24, 17 @ 1:43 pm:

    So IPI is concerned about the cost, but felt no need to be concerned when Rauner blew up the Grand Bargain, propelling the calendar thru March, April, now May?

    I don’t think they know why their concerned(?)


  13. - Steve - Wednesday, May 24, 17 @ 1:59 pm:

    the 5.81 % rate is a large tax increase for many Illinois taxpayers. It’s sad that many people will have to diminish their standard of living to pay the tax burden because Illinois can’t tax their way out of this problem. Don’t be surprised if Illinois goes into a state wide recession over this. Lastly, a tax on services if certainly going to hit the demand for commercial real estate: more than a few places will not be able to pass on the tax.


  14. - Rich Miller - Wednesday, May 24, 17 @ 2:01 pm:

    ===Don’t be surprised if Illinois goes into a state wide recession over this.===

    Nothing like gross hyperbole on a Wednesday afternoon.


  15. - Ron - Wednesday, May 24, 17 @ 2:02 pm:

    Ridiculous, luckily it will be vetoed.


  16. - Adults in the room - Wednesday, May 24, 17 @ 2:12 pm:

    Did Illinois policy institute thank Governor Rauner for the delay


  17. - Steve - Wednesday, May 24, 17 @ 2:34 pm:

    This isn’t an easy situation, it’s all about who is going to have to have a diminished standard of living to pay for government. As the saying goes “don’t tax you, don’t tax me, tax the man behind the tree.”


  18. - Ron - Wednesday, May 24, 17 @ 3:00 pm:

    Steve, everyone should feel the full cost of our inept state government. That way people will begin to vote the kleptocrats (Madigan) out of office.


  19. - winners and losers - Wednesday, May 24, 17 @ 3:11 pm:

    What is the date used for the actual collection of the tax (the date on which it would first be deducted from paychecks)?

    I get an unusual date for it to be 5.81%.


  20. - RNUG - Wednesday, May 24, 17 @ 4:08 pm:

    == You can bond out $10B to pay off the debt, just as we did with pension obligations. ==

    The last thing we need right now is more GUARANTEED debt that goes to the front of the payment line.

    We also don’t need to be rewarding Rauner’s buddies for helping to create this mess.


  21. - Anonymous - Wednesday, May 24, 17 @ 4:28 pm:

    The more it costs, the more tax payers will move out of this state!


  22. - Cheryl44 - Wednesday, May 24, 17 @ 4:44 pm:

    Steve, everyone should feel the full cost of our inept state government. That way people will begin to vote the kleptocrats (Rauner) out of office.

    The only people who can vote Madigan out are the people in his district. They and the rest of us can get rid of Rauner.


  23. - Anonymous - Wednesday, May 24, 17 @ 7:26 pm:

    How is a retroactive tax legal??


  24. - Cimry90 - Wednesday, May 24, 17 @ 8:35 pm:

    As I understand, at the end of 2017 the new tax rate times your taxable income is the amount you will owe less what was paid in state taxes in 2017. I understand that the state will not take out of your check in the second half for the additional amount owed from first half.


Sorry, comments for this post are now closed.


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