* The buried lede…
The peer-reviewed exam by the Project for Middle Class Renewal and the Illinois Economic Policy Institute constructed eight scenarios based partly on progressive income tax structures among Illinois’ neighbors. The Associated Press obtained the study in advance of its release.
Gov. J.B. Pritzker has proposed changing the state’s flat-rate income tax system, in which everyone pays 4.95 percent, to a progressive structure in which wealthier residents pay a higher percentage. It would start at 4.75 percent for the lowest wage earners, remain at 4.95 percent for those earning $100,000 to $250,000, and top out at 7.95 percent for incomes over $1 million.
Authors Robert Bruno and Frank Manzo constructed eight scenarios, drawn in part from graduated tax structures in nearby states such as Iowa and Minnesota, and tested each against five public policy goals: Cutting taxes for at least two-thirds of taxpayers, reducing property taxes by 10 percent, protecting small businesses, wiping out Illinois’ built-in $1.2 billion “structural” deficit, and boosting education and brick-and-mortar funding by hundreds of millions of dollars. […]
Pritzker’s measure is among the scenarios evaluated by Manzo and Bruno, director of the University of Illinois’ Labor Education Program and head of the Project for Middle Class Renewal. The study determined that the Democrat’s plan would mean a tax cut for 85.3 percent of tax filers , no change in the current liability for 12 percent of taxpayers, and an increase for 2.8 percent — those making more than $250,000 a year.
It would generate $3.12 billion extra per year, less than Pritzker’s estimate of $3.4 billion
According to the AP and to one of the study’s authors, the study figured Pritzker’s corporate tax hike into its projection.
Business interests have been saying for weeks that the Pritzker proposal wouldn’t raise as much as advertised, but this is the first group on the left saying the same thing.
Click here for the study and click here for the press release.
Overall, the report had good news for the Pritzker camp. But it’s not good at all if the governor’s revenue projection is off by 8 percent.
I’ve asked the governor’s office for a response.
*** UPDATE *** The governor’s office points out that the study didn’t run Pritzker’s actual plan. The study “implemented” the plan using Fiscal Year 2018 numbers, instead of the higher incomes during Fiscal Year 2021, when the plan would first be implemented.
That explains a lot of the discrepancy. They also went back a year earlier to calculate their estimates than Pritzker (2015 vs. 2016).