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Biss and Madigan agree on tax idea

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Illinois

* Sen. Daniel Biss writes about getting rid of Illinois’ flat income tax and replacing it with a graduated tax. The deadline to get the proposal on the November ballot has passed, so he suggests an alternate measure…

An even simpler approach would just be to increase the standard deduction. That has the effect of creating a progressive tax with just two brackets.

* Turns out, somebody else agrees with him…

House Speaker Michael Madigan says he wants to raise more revenue — to help balance the budget — by taxing the rich.

“I have said for the last year and a half I’m prepared to negotiate with the governor to find the money to pay for those services. My first choice in finding money would be taxing the wealthy.”

Madigan says it’s possible even with Illinois’ flat-tax rule. He says it can be done through “exclusions and deductions.” For instance: raising the overall income tax rate but giving low-income workers a break.

As we’ve discussed before, MJM often drags this idea out during campaign season, then it disappears as soon as the votes are safely counted. And it’s pretty safe to push this idea because Bruce Rauner hates a progressive income tax almost as much (or even more) than he hates the CTU - and that’s saying something.

Your thoughts?

posted by Rich Miller
Monday, Jun 6, 16 @ 12:30 pm

Comments

I’ve suggested, for some time now, tying the personal exemption to the poverty level income amount.

Comment by Lucky than Good Monday, Jun 6, 16 @ 12:34 pm
At some point soon it has to be more than election rhetoric. Maybe this year it passes the GA … but I’m not taking bets on Rauner signing it even if he can blame the Dem’s for it.

Comment by RNUG Monday, Jun 6, 16 @ 12:35 pm
Take a deep breath, support, and make MJM follow through on it. Big give for Gov (at least this specific option, in before OW saying revenue not a compromise), so tie it to a few important Gov wants. Do same with every other revenue increase option until gap closed.

Comment by Lomez Monday, Jun 6, 16 @ 12:38 pm
The language being used isn’t super accurate. Deduction is being used instead of exemption or subtraction, which is a different factor.

At the moment, the state follows the federal exemptions on Step 4 of the IL-1040. The impact is, of course, that folks with more dependents get more exemptions or a larger “deduction.”

I am A-Okay with increasing the exemption, but the trick is it won’t do what they’re suggesting that it would do. Individuals or small families would still wind up in a regressive situation more so than the exemption policy has already made them.

If they want to do it right, they should be adding a subtraction — not increasing the exemption.

It’d be pretty easy to add a subtraction to the Schedule M that is something like $7,000 for single or married filing separately and $14,000 for married filing joint.

Combined with the exemption, this would wind up excluding most households near or below the poverty line from state income tax, and give a little break to middle class earners without having more children or rewarding larger families with lower taxes.

At a %5.5 income tax rate, this would save single filers $385 and joint filers $770.

That would take a lot of the wind out of the “$1,000 tax increase per middle class family” argument.

Comment by Anon Monday, Jun 6, 16 @ 12:39 pm
===Big give for Gov (at least this specific option, in before OW saying revenue not a compromise), so tie it to a few important Gov wants.===

Can’t be a give if revenue IS required, no matter the mechanism or choice of avenue…

===…so tie it to a few important Gov wants.===

Nope. No reward for a required element.

What else you got

Comment by Oswego Willy Monday, Jun 6, 16 @ 12:41 pm
Mike- it hasn’t worked out too well for either NJ or CT. In fact the former Governor of CT who raised taxes announced she is moving to Florida due to CTs lousy business environment. Taxing the rich always sounds great as a campaign slogan but rarely works out so well. The wealthy find a way to escape the tax increase leaving behind the folks who can’t move and need the state’s resources. Madigan is a dinosaur and unfortunately has royally screws us with years of overspending and failing to fund the pensions properly. At least he can’t escape the biological term limit so brighter days ahead

Comment by Sue Monday, Jun 6, 16 @ 12:43 pm
So we already have now a progressive income tax with two brackets, with tax rates of zero and 3.75%, defined by a standard deduction. This proposal gives the legislature two knobs to turn, X and Y, by raising the standard deduction to X and raising the 3.75% to Y%. This proposal is really no change from what we have now, except that the Y% rate gets higher as X gets higher.
Seems to me that half of the middle class gets dinged.

Comment by OldIllini Monday, Jun 6, 16 @ 12:45 pm
I agree very strongly with the idea to raise the income tax on the highest earners while exempting everyone else, if it’s constitutional.

There could not be a better time than now for Democrats to push for this policy, because Rauner offers no extra sacrifice for people like him and wants to get huge savings out of the wages and benefits of many thousands of middle class workers. This is grossly unfair.

Comment by Grandson of Man Monday, Jun 6, 16 @ 12:47 pm
I think a back-door progressive tax system would be a big give by the Governor, but I also think he would never — EVER — do such a thing.

From tax policy to government-funded motorcycle lessons, Bruce Rauner just doesn’t do things that don’t benefit Bruce Rauner.

– MrJM

Comment by @MisterJayEm Monday, Jun 6, 16 @ 12:48 pm
“At least he can’t escape the biological term limit so brighter days ahead”

Just when I’d thought Sue had finally hit bottom…

– MrJM

Comment by @MisterJayEm Monday, Jun 6, 16 @ 12:51 pm
The biggest “give” the Republicans made to the Democrats this year, was the quicker, easier voter registration process. That was a stunner, in the context of what ALEC and most Republican legislators and governor’s have been pushing across the country. Rauner did not demand his legislators vote against it, and holds this big chit in his pocket.

We’re still waiting for the other shoe to drop. This had to be part of a larger deal, IMHO. Could be wrong.

Comment by walker Monday, Jun 6, 16 @ 12:54 pm
==- Sue - Monday, Jun 6, 16 @ 12:43 pm:==

Oh, Sue, try the truth for once. Rell said “taxes weren’t a big factor for her” move. What’s the first thing she cited, even before the non-tax business environment? The great property she already owned in Florida.

http://www.ctpost.com/local/article/Former-Gov-Rell-switching-residency-to-Florida-7462897.php

Comment by Precinct Captain Monday, Jun 6, 16 @ 12:55 pm
You want to create a relatively clean progressive tax using the flat tax, create a flat per person direct (but not refundable) credit. Allow a refund of any actual taxes paid up to that level.

Comment by RNUG Monday, Jun 6, 16 @ 1:02 pm
I disagree with the editor.. MJM tried to get the progressive tax plan passed before but it failed to get enough votes by the legislature or it was vetoed.

Comment by Jay Monday, Jun 6, 16 @ 1:02 pm
==Nope. No reward for a required element.==

Most of us recognize this would be seen as huge give by Gov. It would take pressure off Dems to get the revenue they want but don’t have the guts to do themselves. It would close the gap by a material amount and focus negotiations going forward.

But you keep standing firm. Give MJM everything for nothing and call it compromise. It’s the Edgar Republican Way.

Comment by Lomez Monday, Jun 6, 16 @ 1:03 pm
The idea of tying a tax rate increase to an increase in the standard deduction has always seemed like a no brainer to me. Every time I hear people pushing for a graduated tax I wonder why they don’t do this instead.

The end result is similar, and this plan has the added benefit of actually being realistic to enact into law.

Comment by Just a Reader Monday, Jun 6, 16 @ 1:06 pm
- OldIllini -

===by raising the standard deduction to X===

I looked through all of the Illinois tax forms and I don’t see any standard deduction. To which standard deduction do you refer?

Perhaps you are thinking of your federal taxes where a person can take a standard deduction or itemize their deductions, but I just can’t find anything in Illinois that is a standard or itemized deduction.

Comment by Anon Monday, Jun 6, 16 @ 1:08 pm
I’d love to have a progressive income tax, but what about the state constitution? You can admit that you’re bypassing the constitution via these deductions and other gimmicks and the courts will allow it? Isn’t that what was tried with pensions?

Comment by lake county democrat Monday, Jun 6, 16 @ 1:14 pm
Can step away from the obvious need for a more progressive tax structure, and talk about the fact that Biss is juggling fire?

Comment by AlabamaShake Monday, Jun 6, 16 @ 1:16 pm
Oh - Lomez -

===And it’s pretty safe to push this idea because Bruce Rauner hates a progressive income tax almost as much (or even more) than he hates the CTU - and that’s saying something.===

Please keep up.

Comment by Oswego Willy Monday, Jun 6, 16 @ 1:19 pm
Yes, yes, yes!

Comment by Anonymous Monday, Jun 6, 16 @ 1:27 pm
==Madigan is a dinosaur and unfortunately has royally screws us with years of overspending and failing to fund the pensions properly. ==

More silly nonsense. Madigan has played a role in this but he certainly hasn’t done it all on his own and anybody that continues to argue such a thing is just being ridiculous. It’s a shame when people cannot debate honestly and instead have to throw out talking points with little to no thought about what they are saying.

Comment by Demoralized Monday, Jun 6, 16 @ 1:29 pm
==Give MJM everything for nothing and call it compromise==

Another victim heard from

Comment by Demoralized Monday, Jun 6, 16 @ 1:30 pm
Kind of academic.

Any revenue idea comes down to what the governor– any governor — will sign.

Despite the recent surreal fiction that governors are powerless when faced with Jedi Master Obi Wan Madiganobi, governors are the 800-pound gorilla in Illinois.

If the governor doesn’t move, nothing gets done.

It’s hard enough to get to 60/30 on a revenue plan that a governor supports. A veto-proof revenue bill is beyond crack dreams.

Comment by wordslinger Monday, Jun 6, 16 @ 1:41 pm
I’m in agreement with raising the SD and increasing the rate. Only caveats are that retirement income should also be taxed under these rules, and no one (excluding retirees) making under $150K a year should have to pay higher income taxes.

Comment by A Modest Proposal Monday, Jun 6, 16 @ 2:04 pm
===If the governor doesn’t move, nothing gets done.===

When folks start attributing unnecessary deaths to him, or schools don’t open, etc, I think the pressure will only be placed on him.

However, I don’t know how that would work since he claims according to this Capitol Fax’s reporting to not follow the news.

Comment by Anon Monday, Jun 6, 16 @ 2:17 pm
Word makes a good point that no tax change will pass that Rauner doesn’t want. It’s a safe prediction that the ultimate tax hike will be regressive, adding to the State’s sorry record of regressivity in State and local taxes and fees.

Comment by anon Monday, Jun 6, 16 @ 2:24 pm
The constitution requires a flat tax. If you can’t enact a graduated tax by CA, you can’t back-door it w a scheme of credits, sen lapaille had a similar

Comment by Langhorne Monday, Jun 6, 16 @ 2:35 pm
Why are we talking about middle/low income taxpayers paying more or paying less? The number $150,000 (which is not rich, by the way–at least here in the suburbs) has even been thrown out there.

What about those making millions? Making 54 million, for example? Just think of how much revenue could be collected if the people we talk about raising taxes on were those, not the ones making 85K. Why do middle class people love to disparage each other (union vs. non or public vs. private) when the people who could easily pay more without noticing any dings to their lifestyle are off the hook? Why?

Reminds me of the people who are looking for fallen pennies or change on the pavement and thinking they’ve hit a gold mine. We are sad for not demanding those with serious excesses pay more.

Comment by Anonymous Monday, Jun 6, 16 @ 2:41 pm
I am not sure it is constitutional. In any case, the idea will encounter fierce opposition. The right way to do this is to change the constitution.

Comment by Old Lobbyist Monday, Jun 6, 16 @ 2:44 pm
Identify

=== Why do middle class people love to disparage each other (union vs. non or public vs. private) when the people who could easily pay more without noticing any dings to their lifestyle are off the hook? Why?====

Comment by Liberty Monday, Jun 6, 16 @ 2:55 pm
Anon@1:08 pm ==To which standard deduction do you refer?==

This one:

==Sen. Daniel Biss … suggests an alternate measure…

An even simpler approach would just be to increase the standard deduction. That has the effect of creating a progressive tax with just two brackets.==

Comment by OldIllini Monday, Jun 6, 16 @ 3:01 pm
Yes, it would have to be submitted to the voters as a Constitutional Amendment.

According t the Comptrollers Office there were $8.95 billion in ‘tax expenditures” (I love that phrase as it implies that all is the governments money) Of that $2.23 was not taxing retirement income.

That leaves $6.72 billion more in lost revenue. Why is everybody so obsessed with taxing retirement income but not the other 75%? Why? Why? Not even brought up.

Comment by Federalist Monday, Jun 6, 16 @ 3:03 pm
Madigan agrees with a lot of things as campaigns gear up. Then they disappear, only to be dusted off again next cycle.
Not that anything actually changes.

Comment by Anonymous Monday, Jun 6, 16 @ 3:46 pm
No, you do not need a constitutional amendment to do this. It is already on the IL-1040 and set to $2,150 for the 2015 tax year. It has gone up every year for the past several years. Does anyone honestly think a judge is going to say that those incremental increases are fine but a large increase isn’t?

Comment by Lucky than Good Monday, Jun 6, 16 @ 4:10 pm
“- Old Lobbyist - Monday, Jun 6, 16 @ 2:44 pm:

I am not sure it is constitutional. In any case, the idea will encounter fierce opposition. The right way to do this is to change the constitution.”

Only if pension protection is also eliminated. This state has two classes of citizens. It’s completely outrageous that taxpayers are on the hook for investment returns of the coddled public workforce.

Comment by Anonymous Monday, Jun 6, 16 @ 4:33 pm
One way to make our revenue system less regressive (but not progressive) is to raise the flat income tax even higher and cut the sales tax to compensate. The regressive sales tax is a big component of the overall tax burden for middle and low-income taxpayers, but it’s a minuscule percentage for the wealthy. Rauner knows this well. That’s why he prefers a sales tax hike to an income tax increase (although he hates all taxes).

With more and more wealth and income concentrated at the top, there’s no solution to this state’s fiscal problems that doesn’t involve making our tax system less regressive. If there’s not enough support for an override, then there will be no fix until there is a new governor. The current one is not willing to change his core views, no matter what the data show.

There, I just broke my new years resolution again. Oh well.

Comment by X-prof Monday, Jun 6, 16 @ 4:37 pm
“- Old Lobbyist - Monday, Jun 6, 16 @ 2:44 pm:

I am not sure it is constitutional. In any case, the idea will encounter fierce opposition. The right way to do this is to change the constitution.”

Only if the pension protection is also eliminated. This state has two classes of citizens, the regular tax paying private workers and the coddled class of public employees. It’s completely outrageous that taxpayers are on the hook guaranteeing investment returns.

Comment by Tone Monday, Jun 6, 16 @ 4:56 pm
—That leaves $6.72 billion more in lost revenue. Why is everybody so obsessed with taxing retirement income but not the other 75%? Why? Why? Not even brought up.—

So, if $2.2 Billion comes from not taxing retirement, then where does the $6.7 Billion come from?

Comment by A Modest Proposal Monday, Jun 6, 16 @ 4:59 pm
- Tone -

State workers are taxpayers too.

You’re welcome

Comment by Oswego Willy Monday, Jun 6, 16 @ 5:19 pm
For those commenters complaining that there is no “standard deduction” in Illinois law, this is just sloppy language. Illinois has an “exemption” for each individual taxpayer (plus dependents allowed on the federal return), which is $2,150 on the 2015 return and is indexed for inflation. Individuals get an extra $1,000 exemption if they are 65 and another $1,000 if they are legally blind. The $2,150 exemption means that we effectively have a graduated tax - 0% on the first $2,150 (or more, on joint returns or returns with dependents) and the flat rate on income above that.
There is nothing unconstitutional about this. Article IX, Section 2, of the Constitution says that “Exemptions, deductions, credits, refunds and other allowances shall be reasonable.” The Illinois income tax had the basic exemption amount before the 1970 constitution was ratified, and the minutes of the debates show that the delegates believed this provision for reasonable exemptions allowed this structure. Would a $20,000 or $100,000 exemption is “reasonable” is for the courts to decide.

Comment by Whatever Monday, Jun 6, 16 @ 5:29 pm
== Isn’t that what was tried with pensions? ==

What the GA tried with pensions was a crystal clear violation of the State Constitution. Playing games with deductions and credits is more questionable, especially if you keep the basic flat tax structure and tinker with it for a clearly defined goal. For example, excluding per person income equal to the federal poverty rate would have a clear objective of helping the power that just coincidentally shifted the tax burden to wealthier people. Directly imposing a “soak the rich” surcharge on incomes over $1M has creating a 2 tiered income tax as it’s primary objective and definitely wouldn’t be constitutional.

Comment by RNUG Monday, Jun 6, 16 @ 8:03 pm
Poor … not power in 3rd sentence

Comment by RNUG Monday, Jun 6, 16 @ 8:08 pm
I recall RNUG suggestedcspmething like this year’s ago in the penson debate

Comment by illinois manufacturer Monday, Jun 6, 16 @ 8:25 pm