* The Senate Democrats are being briefed today on the newly proposed graduated income tax rates.

The drafters have addressed the criticism of the “marriage penalty” by coming up with different rates for married people and single filers. The language is in Amendment 1 to SB687.

Remember that these rates only apply to income earned within the brackets. Here are the proposed rates for joint filers…

4.75% $0-10,000
4.85% $10,001-100,000
4.95% $100,001-250,000
7.75% $250,001-500,000
7.85% $500,001-1,000,000
7.99% $1,000,000+ (includes all income)

For taxpayers who do not file a joint return…

4.75% $0-10,000
4.85% $10,001-100,000
4.95% $100,001-250,000
7.75% $250,001-350,000
7.85% $350,001-750,000
7.99% $750,000+ (includes all income)

* Meanwhile, the state’s estate tax would be repealed on January 1, 2021 (Amendment 1 to SB689).

And I’m not quite sure yet what Amendment 1 to SB690 does to property taxes (it’s supposed to be a freeze of some kind), but click here and maybe some of you smart people can explain this in comments.

All three bills must move forward together, I’m told. One goes down, they all go down.

*** UPDATE 1 *** I’ve been advised to tell you that this is the Senate Democrats’ proposal. It’s not yet an agreed proposal. This is a step in the process. There’s still more negotiating to do, apparently.

*** UPDATE 2 *** House GOP spokesperson Eleni Demertzis…

We have said this since day one: A progressive tax is just a blank check for Democrats. They’ve already changed the rates from their initial proposal– without a care of the effects to middle class families and Illinois businesses. Democrats simply can’t be trusted with the ability to manipulate these rates anytime they want to spend more taxpayer dollars.

*** UPDATE 3 *** From the Senate Democrats…

Revenue:
Individual Income Tax Rates: $3.570 billion

Corporate Tax Rate: Increase from 7% to 7.99%: $350 million
Increased funding for programs/property tax relief:
Local Governments (LGDF) $100 million increase

Child Care: $130 million

Individuals receive a $100 income tax credit per child
Eligibility: Single filers ineligible if making over $80,000. Married filing jointly ineligible if making over $100,000

Property Tax Relief: $365 million

· School district tax freeze: $265 million. (SB690) If the state funds special education, transportation, free and reduced meal programs and other mandated categorical programs AND funds the Evidence Based Funding formula at a minimum increase of $350 million, then the local property tax rates for school districts are frozen for that year. It remains frozen so long as the state continues to meet those funding levels.
Illinois State Board of Education will certify funding levels, and if the levels aren’t met, districts can adjust rates as allowed under current law.
· Property tax credit: $100 million. (Contained in SB 687)Increases income tax credit for property taxes to 6 percent from 5 percent.

Total Estimated New Revenue (minus additional funding/property tax relief): $3.325 billion

SB 689 Repeal Death/Estate Tax

What it does:
Repeals what’s often referred to as the “death tax” in Illinois, the tax on the value of an estate that someone inherits. Of note, the agriculture community has been particularly critical of this tax. This provision is linked to voters approving the Fair Tax (SJRCA1).

Details:
SB 689 repeals the Illinois Estate and Generation Skipping Transfer Tax Act. It eliminates the Illinois Estate Tax on estates of persons dying on or after July 1, 2021, or for transfers made on or after July 1, 2021, only if Senate Joint Resolution Constitutional Amendment 1 of the 101st General Assembly is approved by voters prior to that date.

Background:
Currently, the exclusion amount in Illinois is $4.0 million for persons dying on or after January 1, 2013. At the federal level, the exclusion amount is currently $22.4 million for deaths occurring between 2018 and 2025 for married couples aggregating their exemptions and $11.2 million for all other taxpayers.

If the amount of the estate exceeds ($4 million state, $22.4 million federal) either of these amounts for those affected taxpayers, it is subject to a 40% estate tax at the time of death. SB 689, as amended, eliminates the state tax imposed under this Act.

SB 690 Property Tax Relief

What it does:
As long as the state lives up to its responsibilities to fund school districts’ breakfast and lunch programs, student busing costs, etc., AND continue to invest an additional $350 million annually in overall school funding, then school districts tax rates are frozen. This provision is contingent on voters approving the Fair Tax (SJRCA1) Amendment.

This would be an annual process. The freeze would be contingent on the state meeting its obligations to fund education and thereby offset the need for local school boards to go to property taxpayers.

Note: All components would be effective Jan, 1, 2021, if and only if the Fair Tax Constitutional Amendment (SJRCA1) is put on the ballot by lawmakers and then approved by voters.

*** UPDATE 4 *** Sen. Dale Righter (R-Mattoon) just asked if the governor supports this specific rate structure. Sen. Toi Hutchinson (D-Olympia Fields) who chairs the Revenue Committee, did not give a direct response, mentioning negotiations and saying the governor is supportive of the general principles of a graduated income tax.

*** UPDATE 5 *** No surprise here, but the Senate Executive Committee passed the rates bill and the estate tax bill. No debate yet on the property tax bill.

*** UPDATE 6 *** From the governor’s press office…

From day one, Governor Pritzker has made clear that he prioritizes negotiations with the General Assembly on the fair income tax. Today represents another important step in the negotiations, and we look forward to continuing those conversations with stakeholders in the House as well. Governor Pritzker’s focus on making our system more fair means that 97 percent of Illinois taxpayers will pay the same or less in income taxes, while only those making more than $250,000 will pay more.

*** UPDATE 7 *** The property tax freeze component just passed Senate Exec on a partisan roll call.