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*** UPDATE *** I’m closing comments on this post because I did the math with a bit of help and found that the tax avoidance issue is basically a nothingburger. Click here to see the results.
* Crain’s…
The Pritzker administration unveiled the first details of its long-awaited graduated income tax, and perhaps the biggest surprise is that it contains a true millionaire tax.
Under the proposal, households making more than $1 million will see all of their income taxed at the proposed 7.95 percent rate rather than just the portion above $1 million. Higher rates kick in for those making $250,000 or more, but the higher rates are applied only to the portion above $250,000. That is, until those households hit the $1 million threshold.
* Tribune…
Madigan twice backed efforts to amend the state constitution to create a 3 percent tax surcharge on income above $1 million. He never got enough votes to put the question on the ballot, but voters in 2014 endorsed the idea by a wide margin in an advisory referendum. The 7.95 percent top rate in Pritzker’s plan matches what Illinoisans would currently pay on income above $1 million if Madigan’s idea had been adopted.
Laurence Msall, president of the nonpartisan budget watchdog Civic Federation, commended Pritzker for releasing the details of his plan. The Civic Federation does not have a position on graduated income taxes generally or Pritzker’s plan specifically, Msall said.
“Coming forward with the specificity removes a lot of the uncertainty and speculation as to what the governor and his team intends to do,” he said. “It provides a real opportunity for the state of Illinois’ policymakers to engage in a meaningful debate on the future of tax policy in Illinois.”
Msall said one of his organization’s initial concerns is that charging the 7.95 percent rate on all income for people who earn more than $1 million could lead to “very significant tax avoidance.”
* Capitol News Illinois…
But it’s the plan for the highest bracket that led Illinois Chamber of Commerce President Todd Maisch to call the plan a “millionaire’s tax,” which he said will drive high-income earners out of the state: When an earner hits $1 million of income, every penny they bring in would be taxed at a 7.95 percent rate.
“There’s always a need for more money, especially when you think about the fact that you’re squeezing more than $3.4 billion out of those high earners, how many are going to stick around to pay that tab?” Maisch said. “That tab then has to get pushed down the scale and we see it in other states. It always starts out as a millionaire’s tax, always ends up a tax on the middle class.”
posted by Rich Miller
Friday, Mar 8, 19 @ 9:36 am
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Maisch has a point. If you’re JB, then how do you ensure that the group targeted with the higher tax rate actually are the ones paying it and not getting super creative with their income to get out of paying it?
Comment by J IL Friday, Mar 8, 19 @ 9:40 am
Is this tax on earned income and capital gains? Because most of the people I know making over $1 mil per year is due to cap gains not earned income.
Comment by JustmeIL Friday, Mar 8, 19 @ 9:40 am
Yes, some millionaires will leave the state, and I hope Pritzker took that into account. But you’d have to assume a very large percentage of millionaires would leave in order to assume less revenue from a higher tax.
Comment by Robert the Bruce Friday, Mar 8, 19 @ 9:41 am
So… a person earning $999,999 will pay far less in taxes than a person earning $1 million, and will result in the person earning less actually earning more. Sounds incredibly short-sighted. Those on the cusp will go to great lengths to make sure their income (at least on paper) falls below $1 million.
Comment by Just Observing Friday, Mar 8, 19 @ 9:41 am
Just Observing - Agreed. Done more for P.R. than economics. I wonder how many folks file for between $1,000,000-$1,500,000 today.
Of course, the ultimate plan could still be a compromise, correct? Could always change the cutoff from $250k to lower, or increase the highest marginal rate.
Comment by Robert the Bruce Friday, Mar 8, 19 @ 9:44 am
===Is this tax on earned income and capital gains?===
For decades now, all Illinois income is taxed at the same rate. For crying out loud, check the Google before commenting here. This is not Facebook.
Comment by Rich Miller Friday, Mar 8, 19 @ 9:44 am
You have to have rate breaks somewhere. So that would always happen.
The real key of course is “how long will the rates stay at the current income levels”.
It will be very temping and very easy to move those brackets down….
Comment by Fav Human Friday, Mar 8, 19 @ 9:46 am
Why not just do a flat tax of 2% for everything over a million? Would this additional tax require a constitutional change?
Comment by Stew Friday, Mar 8, 19 @ 9:48 am
I would encourage the GA look into how New York deals with millionaire tax avoiders. There was a good article on CNBC about that topic. Essentially, New York has broad powers in determining if those millionaires claiming to be residents of others states, actually are not living in New York. This may be very relevant here after the progressive tax passes.
Comment by A Jack Friday, Mar 8, 19 @ 9:50 am
With the expansion of gambling, now is a good time to tax all those new millionaires coming our way.
Comment by City Zen Friday, Mar 8, 19 @ 9:50 am
–But it’s the plan for the highest bracket that led Illinois Chamber of Commerce President Todd Maisch to call the plan a “millionaire’s tax,” …–
Way to sell it, Todd.
Is that going to be your battle cry? “Defeat the Millionaires Tax?”
Comment by wordslinger Friday, Mar 8, 19 @ 9:50 am
“Millionaire’s tax” has a beautiful ring to it. That’s the point of it, for the rich to pay a modestly higher state income tax rate. The top rate could have been Minnesota-ish, around 9 percent. I’m glad Pritzker is aiming at 8% instead of higher.
“which he said will drive high-income earners out of the state”
Meh. A multiyear study was done, and milllionaires are the least likely to leave higher-tax states. I know it’s their tired talking point and fear-peddling, but let’s try to get past that and instead focus on revamping the tax code to make it fairer.
Did we not just see how unfair it is for multimillionaires to be taxed at the same rate as everyone else, while one tried to slash trade/government workers and strip their rights?
Comment by Grandson of Man Friday, Mar 8, 19 @ 9:51 am
As much as 40 % of capital gains is carried interest from the private funds industry. My source is the IRS Tax Stats reports. So good this is a huge tax avoidance loophole federally.
Comment by Not a Billionaire Friday, Mar 8, 19 @ 9:51 am
Upon further reflection, I think this tax will be welcomed by the wealthy. Many have been waiting for the opportunity to help the state dig out of its fiscal challenges, and this well designed plan provides that opportunity in spades. Just think how great it would be, to be one of the 3% that will singlehandedly rescue this state. They can walk around the state doing the queen’s wave, as they are applauded by the masses for their generosity.
And just think, in a few years time, should their initial contribution of $3.4B not be enough, they will welcome another 3% additional tax.
Yes, I think this will be wonderful.
Comment by SSL Friday, Mar 8, 19 @ 9:52 am
What will be interesting if a disgruntled millionaire questions the legality of a flat rate on only millionaires income in court.
Comment by Steve Friday, Mar 8, 19 @ 9:53 am
As much as i try, i cant find much wrong with the progressive tax presented….
But, after looking over details last night i cant help but wonder the negative effects of the corporate hit. Small mom and pop businesses havent had time to digest the min wage increase and now this. Time will tell. And as we have learned. JB will ultimately own this.
Comment by Blue Dog Dem Friday, Mar 8, 19 @ 9:54 am
== Madigan twice backed efforts to amend the state constitution to create a 3 percent tax surcharge on income above $1 million. He never got enough votes to put the question on the ballot, ==
I don’t think Madigan really pushed all that hard to get a millionaire’s tax CA through. If I remember correctly, the advisory bill was as much about ginning up voter turnout as anything else.
Comment by RNUG Friday, Mar 8, 19 @ 9:54 am
==Is that going to be your battle cry? “Defeat the Millionaires Tax?”==
Not to mention the Millionaires Tax (then a 3% hike) got 60% in 2014 as an advisory question.
Taxing the rich remains wildly popular among just about everyone except the rich.
If Pritzker’s 97% claim holds up, we’re looking at a very tough, if not impossible time stopping it for opponents.
Comment by curtis Friday, Mar 8, 19 @ 9:57 am
Oh Todd, LOL
===“That tab then has to get pushed down the scale and we see it in other states. It always starts out as a millionaire’s tax, always ends up a tax on the middle class.”===
“Don’t tax millionaires because it needs to go and hurt the little people too.”
That’s embarrassingly pathetic to think this message will win, if it gets to the ballot box with Pritzker paying for a message that…
“97% will not be effected”
Wrong message, Todd. Sticking up for millionaires right now in a state the current President lost by 16 points… yikes.
But, if this is it, it only shows how far shills go by ignoring the exact words they mumble.
Comment by Oswego Willy Friday, Mar 8, 19 @ 9:58 am
Msall’s point about the switch from a graduated tax on income over an amount to all income at $1 million is important. It’s not the way other states generally handle high income, nor is it the federal model. That type of bracket does encourage tax avoidance strategies, and it has the same bracket creep problems that the feds saw for years with the AMT.
Comment by muon Friday, Mar 8, 19 @ 10:00 am
===Time will tell. And as we have learned. JB will ultimately own this.===
lol… a 97% no tax difference, while raising revenue on the wealthy?
Yeah, he’s already owning it, touting it, probably gonna haveta travel with it, gonna put ads on TV for it.
Your concerned trolling is tiresome and ignorant to actual happenings that counter your “fear” or “omens”
Comment by Oswego Willy Friday, Mar 8, 19 @ 10:02 am
What kind of Jedi Mind Trick did @anacaprana pull to get the words “Millionaire’s Tax” to come out of Maisch’s mouth?
Comment by Thomas Paine Friday, Mar 8, 19 @ 10:03 am
Rich you make it seem like comments here are so much better than Facebook. At least opinions are tolerated on Facebook likeonly certain opinions are allowed here.
Comment by Real Friday, Mar 8, 19 @ 10:03 am
===What will be interesting if a disgruntled millionaire questions the legality of a flat rate on only millionaires income in court.===
This is an interesting question.
The issue might be when not if.
Comment by Oswego Willy Friday, Mar 8, 19 @ 10:03 am
== What will be interesting if a disgruntled millionaire questions the legality of a flat rate on only millionaires income in court. ==
Don’t think they will have much of a leg to stand on. Graduated clearly means different. I will concede the structure is unusual but it will be hard to argue equal treatment when the point of a graduated system is unequal treatment.
Comment by RNUG Friday, Mar 8, 19 @ 10:03 am
Real, yes, only certain opinions are allowed here, the informed type.
Comment by Anonymous Friday, Mar 8, 19 @ 10:06 am
- RNUG -
You might be right. I was just thinking maybe a disgruntled millionaire might make a case in court that they are entitled to all the same marginal rates until $1 million because they’d be denied “equal protection under the law”.
Comment by Steve Friday, Mar 8, 19 @ 10:07 am
“Taxing the rich remains wildly popular among just about everyone except the rich.”
I believe some or many rich people would support this. Not every millionaire is an IPI-style anti-tax zealot.
We job creators need a tax cut. Outmigration is a problem, as in “Illinois Exodus.” The GOP and its allies now stand opposed to giving 97% of Illinoisans tax cuts. One GOP state rep has a Twitter post demanding tax cuts. That’s what we’re trying to do. We’re Taxed Enough Already.
Comment by Grandson of Man Friday, Mar 8, 19 @ 10:07 am
===Don’t think they will have much of a leg to stand on. Graduated clearly means different. I will concede the structure is unusual but it will be hard to argue equal treatment when the point of a graduated system is unequal treatment.===
Great stuff, per usual - RNUG -, I’d like to read that lawsuit once it’s filed when it has to address this thinking/argument to the graduated system.
Comment by Oswego Willy Friday, Mar 8, 19 @ 10:08 am
Real, yes, only certain opinions are allowed here, the informed type.
Yeah please only allow opinions for which we agree with. Thank you Master overseer Rich.
Comment by Real Friday, Mar 8, 19 @ 10:08 am
–If Pritzker’s 97% claim holds up, we’re looking at a very tough, if not impossible time stopping it for opponents.–
If it gets to the ballot (3/5 in both chambers required), this little quirk in the Constitution comes into play:
–A proposed amendment shall become effective as the amendment provides if approved by either three-fifths of those voting on the question or a majority of those voting in the election.–
Historically, you get a lot more voters turning out in prez years: 5.2 million in 2016 compared to 4.3 million in 2018 (which was a high turnout for off-year).
Proponents and opponents are going to have to work to get voters to hang around until the end of the ballot to vote on the amendment.
Comment by wordslinger Friday, Mar 8, 19 @ 10:14 am
It’s his blog. I thought you believed in private property.
Comment by Not a Billionaire Friday, Mar 8, 19 @ 10:14 am
=== You have to have rate breaks somewhere. So that would always happen. ===
That would not happen if income under $1 million is taxed at one rate, and only the portion of the income over $1 million is taxed at a higher rate.
Comment by Just Observing Friday, Mar 8, 19 @ 10:18 am
“Queens wave” made me LOL, thank you SSL
Comment by 44th Friday, Mar 8, 19 @ 10:18 am
This has been cleverly structured and presented. Hard to argue against taxing the rich.
The projected revenue is almost all absorbed by current spending. I will be curious to see whether JB then limits spending to revenues or finds a way to spend more.
I thought the Republicans would have been smart to tie spending limits to support for a tax increase. They didn’t see it that way.
Comment by Last Bull Moose Friday, Mar 8, 19 @ 10:20 am
== entitled to all the same marginal rates until $1 million ==
If that does turn out to be the case, the GA could just bump the top rate up by 2© - 3%.
Comment by RNUG Friday, Mar 8, 19 @ 10:21 am
“Proponents and opponents are going to have to work to get voters to hang around until the end of the ballot to vote on the amendment.”
If it loses, it loses. That’s the risk proponents are taking. It should go on the ballot, where voters will decide. Why the fear from the GOP and right wing? It could lose. But the tax cuts for 97% are very attractive, so it could pass. Let’s put a plan out there and see.
Comment by Grandson of Man Friday, Mar 8, 19 @ 10:21 am
==Is that going to be your battle cry? “Defeat the Millionaires Tax?”==
Yep. They’ve fallen right into that trap. As predicted.
Comment by City Zen Friday, Mar 8, 19 @ 10:22 am
I will make sure to vote for my tax cut at the end of the ballot.
Comment by Not a Billionaire Friday, Mar 8, 19 @ 10:23 am
===…charging the 7.95 percent rate on all income for people who earn more than $1 million could lead to “very significant tax avoidance.===
Tax avoidance could also lead to significant jail time. Think on that before avoiding taxes.
Comment by Anonymous Friday, Mar 8, 19 @ 10:24 am
==At least opinions are tolerated on Facebook likeonly certain opinions are allowed here.==
There’s always at least one victim in the crowd.
If you’re holding out Facebook as an example of anything positive when it comes to comments then I’m certain your ability to understand what an intelligent comment is, is very, very low.
Comment by Demoralized Friday, Mar 8, 19 @ 10:25 am
Wordslinger, I believe Constitutional Amendments appear at the top of the ballot. At least they did in 2014.
Comment by God's County Friday, Mar 8, 19 @ 10:31 am
Any thought that this 3/5 bar at the ballot box is easy is foolish.
This will need to be worked, pushed, taught, hammered, shook, be everywhere, be on everything.
It’s not a slam dunk.
That said, GOP GA members unwilling to at least negotiate parameters to this proposal will be seen as supporting “millionaires” first, last, always, since you can’t have a pat position of “no” and try to add nuance to… “no”
Never works that way.
No is no.
Comment by Oswego Willy Friday, Mar 8, 19 @ 10:33 am
I’m looking forward to the Pritzker tax cut as well. That’s real money that I could really use. Thanks Governor Pritzker. The previous guy offered nothing in tax relief.
Comment by Anonymous Friday, Mar 8, 19 @ 10:36 am
Enough with the nonsense about driving the mega-rich out of the state (it’s not any millionaires - it’s million dollar a year earners). They make a million dollars a year, they are going to live where they want. That’s the whole point of having that much money, you can do what you want.
Comment by Century Club Friday, Mar 8, 19 @ 10:36 am
–Not every millionaire is an IPI-style anti-tax zealot.–
In their ad here yesterday, the IPI think-tankery was that graduated income taxes cause “higher income equality.” The rich get richer with graduated incomes taxes.
Somehow, I don’t think the crew writing checks to Baise are on board with that nonsense.
Comment by wordslinger Friday, Mar 8, 19 @ 10:38 am
Sorry Anonynous @10:24 was me
Comment by PublicServant Friday, Mar 8, 19 @ 10:39 am
I wonder if we’ll get an unexpected boost in 2019 tax revenue. Would seem to be a good year for Illinois’ millionaires to cash out some capital gains.
Comment by Robert the Bruce Friday, Mar 8, 19 @ 10:41 am
==Tax avoidance could also lead to significant jail time. Think on that before avoiding taxes==
What’s the old joke about the difference between tax avoidance and tax evasion?
It’d be interesting to find out why JB (J.B.) and team went this route rather than additional marginal rates at higher level (e.g., 8.95% for income at $10mm)
Comment by The Doc Friday, Mar 8, 19 @ 10:43 am