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* Appointed freshman Rep. Jonathan Carroll’s (D-Northbrook) HB4237 would give individual Illinois taxpayers a state tax credit for donations to a state-chartered charity for education. The idea is to get around the federal government’s new state and local tax deduction limit of $10,000. According to Greg Hinz, it is picking up some bipartisan support, including House Republican Leader Jim Durkin…
Carroll said he could call the measure vote a House vote almost anytime now, and believes the outcome will be close but favorable. Other Springfield insiders say a House vote easily could be delayed until later in the spring as the House works on other matters.
But significantly, spokesmen for both House Speaker Mike Madigan and GOP Leader Jim Durkin say they favor passage. “The bill does have some appeal,” said Madigan spokesman Steve Brown. And given that the IRS recently approved prepayment of some property tax bills to avoid the caps, “Perhaps they’ll support this too.” […]
Gov. Bruce Rauner has no official position. A source close to him tells me he believes the IRS will reject such a plan.
But that source did not promise a veto, and the reason seems obvious: While Rauner argues that the new federal rules provide a good reason to adopt some of his plans and reduce local property taxes, it’s hard to see a governor running for re-election vetoing a bill that would provide significant tax savings to tens of thousands and maybe hundreds of thousands of voters, many of them in affluent, GOP-leaning neighborhoods and towns.
Some experts consider IRS rejection of such a plan as extremely likely, if only because charitable contributions are not supposed to confer a benefit on the donor. But the measure almost certainly would end up in court, with no firm timetable on when a decision would come.
* Speaking of all this, if you click here you’ll see Rep. Allen Skillicorn’s very useful interactive map of Illinois by income levels. I tried to embed the map here and failed. So head on over. It’s also useful when discussing a progressive income tax.
posted by Rich Miller
Wednesday, Apr 11, 18 @ 3:04 pm
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The map is interesting, but I think is too blunt of an instrument to show much nuance, which is important to consider given the conclusions he attempts to make from it.
Comment by 47th Ward Wednesday, Apr 11, 18 @ 3:22 pm
I strongly support a workaround. I thought it was very spiteful, what the GOP and Trump did to punish so-called blue states. It is sabotage. They’re blowing up the federal deficit, just like Rauner exploded debt, yet they forced their own hypocritical brand of big government fiscal discipline on states.
Comment by Grandson of Man Wednesday, Apr 11, 18 @ 3:26 pm
The map was interesting until I accidentally found myself in Google Street View. Random views of Illinois are fun.
Comment by Bigtwitch Wednesday, Apr 11, 18 @ 3:34 pm
We could use some help. Illlinois has 2 of the top 20 weathiest zip codes by AGI according to this:
https://www.bloomberg.com/news/articles/2018-04-10/to-visit-america-s-richest-zip-code-first-you-ll-need-a-boat
Comment by Blockee Wednesday, Apr 11, 18 @ 3:39 pm
The map is interesting, but just looking at area doesn’t show how many people are in a zip code. Could be 200, could be 2,000. It doesn’t tell how many people are living in the bright red areas where the median AGI was under the poverty line (for a family of 4). Not arguing that it’s not an issue, just saying that at first glance people might see all the red and think the majority of people are in low income areas.
Comment by Perrid Wednesday, Apr 11, 18 @ 3:43 pm
The SALT deduction was a federal subsidy for local taxes. You receive a reduced federal bill in exchange for paying your state bill.
The counter-argument to that is an argument against the progressive income tax system. High tax “states” (more accurately the aggregation of all the citizens of a high tax state) pay more than they receive, is the claim. But paying in based on what you receive is an assault to the progressive framework.
Comment by anon Wednesday, Apr 11, 18 @ 4:01 pm
I don’t know why the IRS would deny this. You already get federal tax breaks for donating to a charity. If the state wants to give you a tax break as well that’s against the federal tax code? States can’t write their own deductions? Doesn’t the state of Illinois already give a break to people paying tuition in Illinois?
Comment by Da Big Bad Wolf Wednesday, Apr 11, 18 @ 4:39 pm
If you get something of value, like a State tax credit, it isn’t a deductible charitable contribution. This is NOT rocket science. If you buy a ticket to a charity dinner, the value of the dinner is not deductible.
This is beginning to remind me of all the wishful thinking around pension reform ca. 2013.
Comment by Harry Wednesday, Apr 11, 18 @ 4:47 pm
Ask any tax or white collar defense attorney. If your donation affords you a personal benefit(ie refucing your real estate tax obligation) taking the deduction on your tax return will likely land you in Leavenworth. Other then that it’s a great idea
Comment by Sue Wednesday, Apr 11, 18 @ 4:47 pm
The SALT deduction also makes the income tax code less progressive and disproportionately favored the rich, even more so with the higher as standard deduction.
Comment by Anon Wednesday, Apr 11, 18 @ 5:25 pm
==If the state wants to give you a tax break as well that’s against the federal tax code? States can’t write their own deductions? Doesn’t the state of Illinois already give a break to people paying tuition in Illinois?==
Under the proposal, the state is just giving 100% of the money back to you through the tax credit, so you haven’t given anything to the state.
==Doesn’t the state of Illinois already give a break to people paying tuition in Illinois? ==
Tuition does not qualify for a charitable deduction because you get the education in return.
Comment by Whatever Wednesday, Apr 11, 18 @ 5:49 pm
Unfortunately, Illinois is a very high tax state, so SALT was a nice offset to Federal taxes. Also, Illinois pays significantly more in federal taxes than it gets back.
Comment by Ron Wednesday, Apr 11, 18 @ 5:51 pm
Yes, there is an Illinois state deduction for private school tuition, but it has nothing to do with charitable giving.
Comment by Ron Wednesday, Apr 11, 18 @ 5:53 pm
Ron,
Illinois doesn’t pay a dime in federal taxes, its citizens do. Some of them pay more than they recieve in benefits, some get more benefits than they pay in. In total, all the citizens pay more in total than they recieve in total. That’s because of the progressive income tax and our large amount of high earners.
Reinstating a SALT deduction helps the wealthy. The poor and most middle class folks aren’t going to have 24k for a family in itemized deductions, even with SALT. That is to say that this workaround is regressive.
Comment by Anon Wednesday, Apr 11, 18 @ 7:12 pm
Illinois is a high tax state with incomes only a little higher than the national average. We get far less per dollar sent to DC than virtually every state. It’s really bad.
https://www.theatlantic.com/business/archive/2014/05/which-states-are-givers-and-which-are-takers/361668/
Comment by Ron Wednesday, Apr 11, 18 @ 8:21 pm
So I am guessing that Sen. Skillicorn is assuming that no one will bother to google median income by census track maps for Wisconsin (http://www.city-data.com/city/Wisconsin.html) when he speaks of why Foxconn chose southeastern Wisconsin over someplace in Illinois. Or that they will scroll out from a map like that to see that almost every state has only one or possibly two big concentrations of wealth and jobs within their borders.
Comment by benniefly2 Thursday, Apr 12, 18 @ 9:07 am