* Dave McKinney…

Prior to the 2023 tax year, the standard [Illinois income tax] exemption increased 10 times under an automatic escalator tied to inflation put into effect in 2012 by former Democratic Gov. Pat Quinn, who served as the state’s chief executive between 2009 and 2015. The change roughly a decade ago had overwhelming bipartisan support in the legislature.

But the standard exemption will remain flat this tax-filing season at $2,425 for those who declare adjusted gross income of $250,000 or less individually or $500,000 or less for married couples.

State revenue officials say more than 11 million Illinoisans claim the standard exemption on their taxes each year. Because of the inflation-indexing mechanism, the exemption has risen from $2,000 to $2,425 since 2011.

Had lawmakers and the governor not put a pause on that inflationary adjustment, the standard exemption would have stood at $2,625 for tax year 2023. That $200 increase would have marked the largest jump in the exemption since the inflationary index was enacted. That’s because the nation’s consumer price index increased 8% in 2022 – the largest inflationary move since 1981.

By WBEZ’s calculations, the state income tax obligation for a married couple with two minor children and adjusted gross income of $150,000 would be $39 higher than it would have been this tax year had the standard exemption tracked the rate of inflation in 2023.

$39 for a household earning roughly double the median household income ain’t exactly a whole lot of money. Our standard exemption is basically a joke. It’s so small mainly because of the state constitution’s mandate that the income tax must be imposed at a “non-graduated rate.”

* But here’s the problem: The change saved the state budget $114 million this fiscal year, but as the article notes, the costs will rise next year…

The current law states that the inflationary index will be reimposed for tax year 2024. But it promises to come with a significant price tag – approximately $200 million, according to an estimate by the legislature’s non-partisan budget arm, the Commission on Government Forecasting & Accountability.

$200 million is real money.

* Back to Dave’s story…

Emails obtained through an open-records request to Pritzker’s budget office show that a Senate Democratic staffer appeared to initially raise freezing the standard exemption as the revenue omnibus was being negotiated last May between the offices of the governor, Senate president and House speaker.

*** UPDATE *** This change was part of SB1963, which was an omnibus tax bill. From a subscriber…

An additional observation: the CPI-adjustment was actually scheduled to sunset on 12/31/2023. PA 103-0009 extended it until 2028, at the fixed amount of $2,425 for two years and then back to inflation adjusted for 2025-2028 when it will sunset.

And if it had actually sunset in 2023 as scheduled, the exemption would revert way back to just $1,000.

Interesting.