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* 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* Meanwhile, the state’s estate tax would be repealed on January 1, 2021 (Amendment 1 to SB689).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 billionCorporate Tax Rate: Increase from 7% to 7.99%: $350 million
Increased funding for programs/property tax relief:
Local Governments (LGDF) $100 million increaseChild 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 $100,000Property 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.
posted by Rich Miller
Tuesday, Apr 30, 19 @ 2:22 pm
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Ugh…so we’re going to let the Boomers out of the Estate tax?
Comment by Honeybear Tuesday, Apr 30, 19 @ 2:31 pm
Why in the world are we repealing the estate tax?
Comment by LXB Tuesday, Apr 30, 19 @ 2:33 pm
That sure looks like a statewide property tax freeze
Comment by evolve Tuesday, Apr 30, 19 @ 2:34 pm
===That sure looks like a statewide property tax freeze===
Except that PTELL is already on the books, and if you look to the end of the amendment, those provisions were already there. Are they just moving that language to the top?
Comment by thechampaignlife Tuesday, Apr 30, 19 @ 2:36 pm
SB 0690 (SFA 0001)
Amends the Property Tax Extension Limitation Law in the Property Tax Code. Provides that, beginning in levy year 2022, for taxing districts that are school districts (other than qualified school districts), “extension limitation” means 0% or the rate of increase approved by the voters (currently, (a) the lesser of 5% or the percentage increase in the Consumer Price Index during the 12-month calendar year preceding the levy year or (b) the rate of increase approved by voters). Provides that the term “qualified school district” means a school district that certifies to the county clerk that the district: (i) submitted a claim or claims to the Illinois State Board of Education for reimbursement of certain State mandated categoricals for the school fiscal year immediately preceding the levy year and received reimbursement for those State mandated categoricals that was less than 97% of the district’s claims; or (ii) did not receive the minimum funding required for that school district under the evidence-based funding formula. Amends the School Code. Requires the State Board of Education to certify to each school district whether or not the school district is eligible for designation as a qualified school district. Effective January 1, 2021, but does not take effect at all unless Senate Joint Resolution Constitutional Amendment No. 1 of the 101st General Assembly is approved by the voters of the State prior to that date.
Comment by Yup Tuesday, Apr 30, 19 @ 2:39 pm
The State needs money. I know, let’s give a tax break to the people who are inheriting wealth!
Comment by A Young Person Tuesday, Apr 30, 19 @ 2:49 pm
Sounds like a freeze on school district levies unless the district is “qualified” by not having received either state funding for mandated categoricals or the minimum state funding under the evidence-based funding formula. So if the State drops the ball on school funding, then there is no freeze.
Comment by anon2 Tuesday, Apr 30, 19 @ 2:52 pm
I read that funding exemption slightly different, as in any district that is not funded at their adequacy target would be exempt. That would be all Tier 1 & 2 schools at least, and all or most of Tier 3 I think.
Comment by evolve Tuesday, Apr 30, 19 @ 2:53 pm
How many Republican votes will the estate tax repeal garner for the graduated income tax? If the answer is zero, as I suspect, then why give the GOP what they want? Where’s the reciprocation?
Comment by anon2 Tuesday, Apr 30, 19 @ 2:54 pm
–* Meanwhile, the state’s estate tax would be repealed on January 1, 2021 (Amendment 1 to SB689).–
Interesting. Is that intended to land some Downstate legislators with farmland-rich constituents?
Comment by wordslinger Tuesday, Apr 30, 19 @ 2:55 pm
No tax on retirement income and no estate tax? How lucky can a guy, and his heirs, get?
Comment by SSL Tuesday, Apr 30, 19 @ 2:55 pm
Estate tax is a tax on assets that have already been taxed.
Comment by anon Tuesday, Apr 30, 19 @ 2:57 pm
At the top rate it says that it includes all income. I assume all does not include retirement income?
Comment by DuPage Saint Tuesday, Apr 30, 19 @ 3:03 pm
does bouncing this around between the houses prematurely to bide its time during the pendency of the 101st GA - hurt or help the future referendum’s chances?
Comment by To the bill, Tuesday, Apr 30, 19 @ 3:10 pm
Hitting all income above $1,000,000 at a 7.99% rate and removing the graduated rates below is creative. Tax avoidance strategies will become all the rage.
Comment by Donnie Elgin Tuesday, Apr 30, 19 @ 3:17 pm
===Tax avoidance strategies will become all the rage===
No because if you had been paying attention weeks ago you’d know that the window of avoidance is only a few thousand dollars.
Comment by Rich Miller Tuesday, Apr 30, 19 @ 3:19 pm
Not many ways to avoid unless you aren’t an Illinois resident.
Comment by Steve Tuesday, Apr 30, 19 @ 3:21 pm
== Estate tax is a tax on assets that have already been taxed. ==
Eric Zorn has disposed of this myth: The deceased aren’t paying taxes. Instead, the estate tax is paid by inheritors. Taxing transactions is what the state does. Income taxes, gift taxes, and sales taxes almost always involve money that’s already been taxed at least once, if not many times. It’s logically perverse, writes Zorn, to levy a tax on someone when he gets his income by working, but not on someone who gets his money by being an heir.
Comment by anon2 Tuesday, Apr 30, 19 @ 3:22 pm
==Here are the proposed rates for joint filers…==
For a quick second it appeared another bill was being combined too. lol
Comment by A guy Tuesday, Apr 30, 19 @ 3:23 pm
Applying PTELL statewide will have unforeseen consequences and end up costing everyone more than they bargain for.
Comment by JS Mill Tuesday, Apr 30, 19 @ 3:31 pm
I and others have mentioned that the top rates are not high enough.
For example in Minnesota the top rate for a single person is 9.85% above $160,000. For married filing jointly it is 9.85% above $260,000.
So it seems the top rates in Minnesota are higher than Illinois and the top rates go into effect at lower brackets than in Illinois.
I have provided a lot of data in other comments that shows how much wealth there is in Illinois. If Pritzker needs more revenue in the future he better raise the top rate before increasing the lower rates.
Comment by Big Jer Tuesday, Apr 30, 19 @ 3:42 pm
==The drafters have addressed the criticism of the “marriage penalty” by coming up with different rates for married people and single filers.==
Instead of doubling the originally proposed brackets for married filers, they cut some of the brackets single filers. Too funny.
And I”m still seeing the Marriage Penalty.
Comment by City Zen Tuesday, Apr 30, 19 @ 3:44 pm
@anon2 - The estate tax is not paid by the individuals who inherit the property. It’s paid by the estate of the decedent. An inheritance tax, which Illinois does not have, is paid by the individuals who inherit the property.
Comment by consmom Tuesday, Apr 30, 19 @ 3:44 pm
The rates need to be indexed to inflation. Most other states with progressive income taxes index to inflation.
Comment by Matt Tuesday, Apr 30, 19 @ 3:45 pm
=I and others have mentioned that the top rates are not high enough. =
I’m sure the focus now is on passing the constitutional amendment. You want the top rates to be lower and go into effect at higher incomes. They can raise the rates and lower the brackets later on.
Comment by AndyIllini Tuesday, Apr 30, 19 @ 3:49 pm
So, the property tax freeze would be permanent, regardless of inflation as long as they were at 100% of adequacy? It would seem that a referendum would have to be run on an ongoing basis as CPI erodes the prior referendum’s increase the way it’s worded, if the district wanted in excess of 100% adequacy.
Comment by Right Field Tuesday, Apr 30, 19 @ 3:59 pm
Rich - Under 35 ILCS 5/201.1 new, looks like the second tax bracket is 4.9%, not 4.85%.
“4.9% of the portion of the taxpayer’s net
income that exceeds $10,000 but does not exceed
$100,000″
Comment by City Zen Tuesday, Apr 30, 19 @ 4:03 pm
AndyIllini I’m sure the focus now is on passing the constitutional amendment.
Comment by Big Jer Tuesday, Apr 30, 19 @ 4:14 pm
35 ILCS 5/502:
“(c) Joint returns by spouses husband and wife.
Except as provided in paragraph (3):
if spouses file a joint federal income tax return for a taxable year ending before December 31, 2009 or ending on or after December 31, 2021, they shall file a joint return under this Act for such taxable year and their liabilities shall be joint and several”
In other words, I cannot file separate state returns if I file a federal joint return, something I believe that is currently possible. I seem to recall folks on here questioning my “Marriage Penalty” logic with that very fact. Unless I’m misinterpreting…
Comment by City Zen Tuesday, Apr 30, 19 @ 4:15 pm
Thanks AndyIllini ===I’m sure the focus now is on passing the constitutional amendment. They can raise the rates and lower the brackets later on.===
Good Points. One step at a time.
Comment by Big Jer Tuesday, Apr 30, 19 @ 4:16 pm
Eleni fails to mention that the new proposal as detailed by Rich actually lowers the rate on middle class from the original by .05% (4.9% to 4.85%). The only rate that went up was on incomes over a million (7.95% to 7.99%).
So tell us again how it’s the “middle class” that is hurt by the rate changes as proposed here.
Comment by Fixer Tuesday, Apr 30, 19 @ 4:20 pm
The Marriage Penalty is still included.
Husband X makes $600,000. He files a single return and is not subject to the 7.99% rate on all income.
Husband X makes $600,000 and Wife Z makes $600,000. They file a joint return. The tax rate is 7.99% on all income.
This couple would be better off getting a divorce because the tax brackets penalize their marriage.
It’s a Marriage Penalty.
Comment by Matt Tuesday, Apr 30, 19 @ 4:37 pm
Marriage penalty on the child credit too? Nice. Seems awful high threshhold for the single.
Comment by Omay Tuesday, Apr 30, 19 @ 5:08 pm
@Matt - You’re being generous. The Marriage Penalty is more onerous than that:
Single Y makes $100,000. He files a single return and has an effective tax rate of 4.89%.
Husband X makes $50,000 and Wife Z makes $50,000. They file a joint return and have the same effective tax rate of 4.89%.
Two people needed to make the same income as one person yet treated the same tax-wise. Not very progressive.
If the Republicans were smart, they would hammer this marriage penalty home in Chicagoland where many professional dual-income households would be hit hard.
Comment by City Zen Tuesday, Apr 30, 19 @ 5:19 pm
It’s a freeze on the most hated middle class tax and elimination of the most hated rich tax.It’s politically brilliant. Minnesota has a rather steel estate tax.
Comment by Not a Billionaire Tuesday, Apr 30, 19 @ 5:57 pm
– It’s a freeze on the most hated middle class tax and elimination of the most hated rich tax –
And every Republican voted “no” on both.
Comment by Michelle Flaherty Tuesday, Apr 30, 19 @ 6:30 pm
Yep Michelle.Guess they want to be irrelvant.
Comment by Not a Billionaire Tuesday, Apr 30, 19 @ 6:45 pm
=It’s a Marriage Penalty.=
Hucksters like to use fun names to make things sound onerous.
It isn’t a penalty. There is no “penalty” for being married.
It is an INCOME tax. Based on income. Combined income or otherwise.
The rates are pretty straightforward. I guess not enough for you.
Comment by JS Mill Tuesday, Apr 30, 19 @ 7:36 pm
It isn’t a penalty. There is no “penalty” for being married.
You are correct as long as you are talking about the current flat tax. JB’s Fair Tax does create a penalty relative to the flat 4.95 rate.
Comment by Donnie Elgin Tuesday, Apr 30, 19 @ 7:53 pm
Donnie Elgin and JS Mill - be serious please. Across the nation graduated income taxes are indexed to avoid a marriage penalty (a widely used and understood term).
Here is an example: (1) Two single people live together, each making $100,000. They will each pay top out at 4.85%. (2) Two married people file jointly and each make $100,000. They will pay 4.95% on half their income. That is a marriage penalty.
Comment by Anon Tuesday, Apr 30, 19 @ 8:27 pm
Interesting comments about the “death tax”. Not sure what a “Boomer” is…Baby Boomer I guess. That is a long generation that encompasses millions. A bit general I think; 18 years of post-war prosperity equates to a lot of copulation and babies. How is the estate tax not a double tax? Those inheritances from parents, ect were earned and have already had taxes deducted, so why and how is that not double-taxation…I guess I need to ask the Founders of this Republic; I have a feeling what they would say. If that argument isn’t to your liking, why is hard work and perseverance not rewarded for man/woman’s greatest asset….offspring? Everyone on this feed who is a parent wants everything that is best for their child, that is why we work so hard, and some of you feel it is the government’s right to take it away…why? Try reading this book by Chuck, Chuck….man, what is his name again???? Oh yeah, Charles Darwin. “Evolution of the Species”. Work hard, build yourself (in the human world, it is done by assets), and you lineage will succeed.
Comment by Taxedoutwest Tuesday, Apr 30, 19 @ 8:36 pm
Keep the inheritance tax and make the pension payment instead of shorting it every year.
I am stunned by the complete lack of concern about cutting off another easy revenue source at the same time we are levying tax increases on many, failing to make our pension payment, and generally deficit spending.
Not taxing retirement income isn’t enough I guess, no inheritance tax either because obviously we are swimming in cash in Illinois.
We have the bill back log and are going to short the pensions, but hey, let’s get rid of the inheritance tax which doesn’t touch all that many people anyway.
It should be a surprise to no one that we ended up where we are with that type of visionary thinking.
Comment by Anon Tuesday, Apr 30, 19 @ 8:47 pm
“that is why we work so hard, and some of you feel it is the government’s right to take it away…why?”
Because taxation is the price to pay for civilization. Every person for himself or herself is libertarian fantasyland that exists nowhere worth living, in no collective bodies called countries, cities, states, etc. The happiest countries are those where people pay taxes for robust social services.
It’s also easy for the privileged to tell others to totally fend for themselves—those with advantages they didn’t earn, such as race and economic class of birth, being born to parents who could afford to provide a better life for their children, starting life out with advantages.
Those who hate taxation should find themselves a place where they don’t pay taxes for others and others don’t pay for them.
Comment by Grandson of Man Tuesday, Apr 30, 19 @ 9:45 pm
Robust social services. Gotta think sbout that one.
Comment by Blue Dog Dem Tuesday, Apr 30, 19 @ 9:49 pm
==It is an INCOME tax. Based on income. Combined income or otherwise.==
(Checks federal tax brackets)
(Checks California’s tax brackets)
You keep apologizing for the billionaire’s plan. Just make sure he pays you twice.
Comment by City Zen Tuesday, Apr 30, 19 @ 10:11 pm
Three points:
(1) The idea that this rate structure “addressed the criticism of the ‘marriage penalty’” seems like a stretch–the marginal rates are literally identical until you hit $350,001. It seems to me that a more progressive structure would ensure that working- and middle-class couples–not just upper-class ones–can get married without paying more in taxes as a result.
(2) That said, the most significant part of the marriage penalty is the child tax credit eligibility thresholds. If Alex and Blake each make $55,000 and have three kids between them, then they pay roughly $319 more in taxes if they get married, $300 of which is lost child tax credits.
(3) On a different note, the referendum will turn on selling big ideas, not the precise details of the rate structure. I’d be interested to see what happened if the GOP introduced a constitutional 8:5 ratio tethering the high rate to the low rate.
Comment by Athwart Misery Tuesday, Apr 30, 19 @ 11:46 pm
So after going on and on about concentration of wealth and how the rich aren’t paying their fair share, you get rid of the estate tax? When you are talking about skipping pension payments and a recession is coming within a few years? Ugh.
Comment by lake county democrat Wednesday, May 1, 19 @ 8:19 am
Repealing the Illinois Estate Tax is a way to reduce pressure on the few remaining downstate Democrat legislators with agricultural constituencies. see https://www.illinoispolicy.org/house-bill-would-repeal-illinois-estate-tax-protect-family-farms/
Comment by Grandpa2 Wednesday, May 1, 19 @ 9:34 am