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Tax odds and ends

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* Finke

One issue the Republicans mostly sidestepped at the news conference was polling data that shows there is support among both Democrats and Republicans for a graduated tax.

Twice the Paul Simon Public Policy Institute polled people on the graduated income tax. To a certain extent, the results were pretty much what you’d expect. Self-described liberals and Democrats thought the idea was great. The margin was a little closer among people who called themselves moderates or independents, although support among those folks was still pretty overwhelming.

The really interesting result was among people who said they consider themselves to be conservatives or Republicans. Among conservatives, 49 percent were in favor of a graduated tax and 47 percent against. Among Republicans, the margin was 51 percent in favor and 44 percent against.

Now any individual poll can come up with oddball results, but the Paul Simon people found very similar results in polls conducted in consecutive years. Bottom line is that Republican voters may not be as opposed to the idea of a graduated tax as Republican lawmakers.

That’s true about rank-and-file Republican support for a graduated income tax in Illinois.

But the issue has been on the back burner forever, so it hasn’t yet been truly polarized by the two parties. If the measure does get on the ballot and big money is spent against it and Republicans come out publicly opposing it and it’s obviously backed by Democrats, that partisan split could very well change. It happens a lot.

* Sweeny

Pritzker noted that other states around Illinois have graduated income taxes, mentioning Wisconsin and Iowa. In both of those states, however, low- and middle-income people pay a higher percentage of their income in state income taxes than Illinoisans do.

In Wisconsin, a married couple filing jointly and making $14,980 a year pays 5.84 percent in state income taxes; if they make $29,960 or more they pay 6.27 percent; the rate is 7.65 percent for couples making $336,200 and up.

In Iowa, a married couple making $14,382 a year pays 6.12 percent; if they make $31,960 they pay 6.8 percent; at $47,940 the rate kicks up to 7.92 percent, and if that couple earns $71,910 or more they pay 8.98 percent to the Hawkeye State.

For the kabillionth time, you have to look at effective tax rates, meaning the rate after deductions, exemptions, etc. A married Wisconsin couple who made $14,980 a year and filed jointly with two deductions would pay zero state income taxes. They’d face an effective tax rate of just 1.56 percent and pay $468 if they made $29,960.

The same is true of Iowa. Click here to play with that state’s effective rates.

The first thing Pritzker’s new Think Big group had better do is educate political writers about how to calculate effective state tax rates.

* And, finally

A five-cent tax on single-use plastic bags could add up for the average family, based on current use rates.

Environmental groups have estimated 100 billion plastic bags are brought home by U.S. consumers a year — nearly one bag per person a day — or nearly 1,500 a year for a family of four.

The statewide five-cent bag tax proposed by Gov. J.B. Pritzker in his first budget address would bring in about $20 million a year, and it’s far from a done deal. But should it come to pass, it could add up to an additional $75 in annual taxes for a household bringing home 1,500 plastic bags a year.

Or, plastic bag use could fall, as it has in Chicago

Before the tax went into effect Feb. 1, shoppers took home an average of 2.3 disposable bags every time they shopped at a big grocery store. After the tax went into effect, shoppers took home one fewer bag, according to the study.

And in the UK

England was the last country in the U.K. to introduce a charge for single-use plastic bags. Wales was the first to do so, in 2011, followed by Northern Ireland in 2013 and Scotland in 2014. All saw plastic bag use decrease by 70-80% year-on-year.

And Israel

On Jan. 1, 2017, Israel began requiring its supermarket chains to charge 3 cents for plastic bags. Since then, plastic bag use has dropped 80 percent, according to the country’s Environmental Protection Ministry.

While that means Illinois families may not actually wind up paying $75 a year in bag taxes, it also means the state may not raise $20 million from the tax, but that’s a rounding error on a rounding error. It’s essentially using a minuscule budget line to change behavior.

posted by Rich Miller
Monday, Mar 4, 19 @ 12:35 pm

Comments

  1. I’m sure the “fair Tax calculator” that the IPI put together takes into account the effective tax rate when they show folks how their income tax might change. Otherwise, it might be misleading. /s

    Comment by Montrose Monday, Mar 4, 19 @ 12:43 pm

  2. If you want to change behavior, offer a rebate for not using any store bags.

    Comment by City Zen Monday, Mar 4, 19 @ 12:52 pm

  3. ===A five-cent tax on single-use plastic bags could add up for the average family, based on current use rates.====
    Or they could go and buy 3-4 reusable bags for a maybe a buck a piece. I forget to bring them but my spouse always uses them. And there are plenty of times when I use to get a bag at 7-11 for a few items that I skip it now. Not so much that it cost extra but it makes you think whether you actually need it.

    Comment by Been There Monday, Mar 4, 19 @ 12:53 pm

  4. ===offer a rebate for not using any store bags===

    So, the state should give grocery stores money for the rebates? Not sure how that would work.

    Comment by Rich Miller Monday, Mar 4, 19 @ 12:54 pm

  5. $75/year would buy a lot of reusable grocery bags.

    Of course that means I have to remember to take them into the store . . . . . . ;-)

    Comment by OutHereInTheMiddle Monday, Mar 4, 19 @ 12:55 pm

  6. == Of course that means I have to remember to take them into the store . . . ==

    We keep a bunch of reusable bags in the car. Sometimes I find myself going back out to the car to get them because I hate using 10 bags when the groceries will fit in 3 or 4.

    I still think the State should just ban non-biodegradable bags.

    Comment by RNUG Monday, Mar 4, 19 @ 1:00 pm

  7. RNUG - I’m not positive but I think I’ve read a few times that bio-degradable bags aren’t all that bio-degradable (that it takes a very long time for them to decompose).

    As I’ve said before, I appreciate the intent but it’s the wrong time/wrong place: the Democrats (and state) needs more revenue and enough voter good will to get it. A bag tax will work as a cost-free GOP advertisement. Maybe later.

    Comment by lake county democrat Monday, Mar 4, 19 @ 1:06 pm

  8. Bring back paper grocery bags.

    Comment by Anonymous Monday, Mar 4, 19 @ 1:09 pm

  9. I hate to admit this, but I have probably a dozen reusable bags that I fail to take with me when I go into a store. I always take plastic, but I always recycle all of them as I do with all my paper, plastic, glass etc.

    If I had to pay for the privilege, and convenience of taking plastic, I guarantee you that I would bring my own bags

    Comment by illini Monday, Mar 4, 19 @ 1:11 pm

  10. Repubs don’t advertise effective rates. Dems don’t advertise all the hidden deductions behind those tax brackets. Case in point:

    I plugged in $250,000 single living in Ames, Iowa. The effective tax rate was 4.99%, not too far off what the equivalent person would pay in Illinois.

    $200,000. Single. Basically no income tax hike. Is that what we can expect in Illinois?

    Comment by City Zen Monday, Mar 4, 19 @ 1:12 pm

  11. –The first thing Pritzker’s new Think Big group had better do is educate political writers about how to calculate effective state tax rates.–

    That might be the whole ballgame. Opponents aren’t going to correct inaccurate reporting.

    Comment by wordslinger Monday, Mar 4, 19 @ 1:14 pm

  12. Correction: I plugged in $200,000 single…

    Comment by City Zen Monday, Mar 4, 19 @ 1:14 pm

  13. In Minnesota, Wisconsin and California, the effective top tax rates for million-dollar incomes are not terribly lower than the marginal rates, looking at places like Minneapolis, Lake Geneva and Los Angeles.

    Both Minnesota and California report budget surpluses, though Minnesota’s has decreased.

    What we ought to do, because of the political landscape, is dismiss right wing notions of reform. Why waste our time fighting for those?

    Comment by Grandson of Man Monday, Mar 4, 19 @ 1:16 pm

  14. I think it is important for democrats to remember and make sure they pitch that prior to bags being taxed in Chicago retailers were required to thicker bags that consumers could bring back. It didn’t curb consumer habits so they ended up taxing. The problem is the argument feels completely framed on budgetary needs rather environmental protection.

    Comment by twowaystreet Monday, Mar 4, 19 @ 1:32 pm

  15. People always vote to raise taxes on others. Themselves, not so much. JB said he’ll be transparent on the proposed progressive rates and structure, which is the right thing to do. If he proposes what is necessary to address the state’s fiscal needs, it may be tough to pass. You can’t get there by raising taxes on the 1% by a few percentage points. No other state does it that way, and no other state has anything close to the budget gap and unfunded pension liability Illinois does. You can raise taxes on the wealthy by a higher percentage, but everyone is going to have to contribute more.

    Now, where did we land on the sales tax and gasoline tax increases?

    Comment by SSL Monday, Mar 4, 19 @ 1:34 pm

  16. Publish the rates and then take a poll

    Comment by Sue Monday, Mar 4, 19 @ 1:38 pm

  17. Florida residents are accustomed to bringing their own reusable bags into stores when shopping. It takes a little getting used to but really isn’t a problem at all. In fact, they are less likely to tear and easier to carry with the handles. The bag tax might not be popular but it is a good idea on a number of levels and can be easily avoided by the consumer without much effort.

    Comment by Stones Monday, Mar 4, 19 @ 1:40 pm

  18. I checked what my tax would be in WI and IA. I would pay less in state taxes if I lived in Iowa at my salary.
    I have no reason to believe that the average effective tax rate in Illinois would decrease if there was a switch to a graduated tax structure. Illinois needs more money, and when the Democrat party has been in power, it usually looks to increase revenue, not decrease it. I think these polls are based on the “low-information” voter, which describes most people.

    Comment by Nanker Phelge Monday, Mar 4, 19 @ 1:50 pm

  19. Just lost a long post I was typing up. Not doing it again so you don’t get the stats.

    The other day I played with the IPI calculator using married, no children. It seems to be straight.

    Uding the IDOR 2016 tax statistics I referenced the other day, it looks like half or a bit more would pay the same or less under the Iowa rates. And a but more than a third would pay the same or less under the Wisconsin rates. So it should be possible to structure rates to meet JB’d pledge to reduce rates for about half the income tax payers.

    Comment by RNUG Monday, Mar 4, 19 @ 1:52 pm

  20. == I appreciate the intent but it’s the wrong time/wrong place: the Democrats (and state) needs more revenue ==

    $20M, less once people change their habits, is less than a rounding error in the budget.

    Comment by Anonymous Monday, Mar 4, 19 @ 1:54 pm

  21. 2:54pm was I

    Comment by RNUG Monday, Mar 4, 19 @ 1:57 pm

  22. Readjusting the rates so that it is neutral, isnt going to cut it. Illinois, on the conservative side, needs to generate at least $3 billion/yr. Our effective rates will end up mirroring California and Minnesota.

    Comment by Blue Dog Dem Monday, Mar 4, 19 @ 2:10 pm

  23. Grandma Seepage is old enough to remember that when Illinois passed its income tax in the late ’60’s, it was promised to remain a flat tax. That was one of the deals made to get the bill passed. It is a slippery slope to change such things. Opponents will surely point that out when promises are made to keep low/middle income households out of harm’s way.

    Comment by Violet Seepage Monday, Mar 4, 19 @ 2:13 pm

  24. The bottom line is that we need to be willing to pay for the services we want and expect. Schools, roads, police, prisons, etc. all cost money. The Paul Simon institute’s polls consistently show that specified spending cuts are even less popular than tax increases.

    I will take the Republicans seriously when they list specific budget cuts to match the low taxes they insist on. Perhaps, Sen. Tracy and Rep. Hammond will submit a bill to shutter WIU. Perhaps, all of the downstate Republican legislators will insist on only bringing back to their districts expenditures equal to the revenue their areas generate. Perhaps, they will explain how property taxes can be cut without an increase in revenue from some other source. Perhaps, but I’m not holding my breath.

    What would be “fiscally conservative” would be to match revenues to expenses and be up front with voters on what actually needs to be cut if the revenue side is not brought in line.

    Comment by Pot calling kettle Monday, Mar 4, 19 @ 2:42 pm

  25. It should be possible to set the rates for a graduated state income tax that would reduce or maintain the taxes for middle and lower income workers while increasing the taxes for those with higher incomes.

    Comment by Enviro Monday, Mar 4, 19 @ 2:44 pm

  26. “Grandma Seepage is old enough to remember that when Illinois passed its income tax in the late ’60’s, it was promised to remain a flat tax. That was one of the deals made to get the bill passed. It is a slippery slope to change such things. Opponents will surely point that out when promises are made to keep low/middle income households out of harm’s way.”

    Luckily, voters will get to decide if the flat tax will change to a progressive tax. If folks believed that this promise meant no one could ever put it to the voters whether they want to amend the constitution to change it to a progressive tax, then I don’t think folks were honest with themselves about how the process works.

    Comment by Montrose Monday, Mar 4, 19 @ 2:48 pm

  27. ==it was promised to remain a flat tax. ==

    A Flat Tax Is A Promise

    Comment by City Zen Monday, Mar 4, 19 @ 2:54 pm

  28. A graduated income tax would look something like this:

    Middle and lower income tax - 4.9% or less.
    Upper income tax - 5% or more.

    This calls for a committee to determine the actual rates.

    Comment by Enviro Monday, Mar 4, 19 @ 3:01 pm

  29. Last two times I shopped a discount chain store in Chicago, I mentioned that it being Chicago, I would have to pay for the bag. The cashier told me they no longer charged for bags. My guess is they passed on the cost through price hikes rather than deal with the Aldi-like hassle of ringing up bags as sales.

    Like a number of posters, I forget to bring the reusable bags with all the time, although I recycle my plastic bags at two grocery stores in the South Suburbs of Chicago.

    Comment by revvedup Monday, Mar 4, 19 @ 3:15 pm

  30. RE: Enviro
    “A graduated income tax would look something like this:

    Middle and lower income tax - 4.9% or less.
    Upper income tax - 5% or more.

    This calls for a committee to determine the actual rates.”

    But are they going to keep some of the current IL deductions - like the property tax credit, supplies and materials credit, tuituion fees, dividend subtractions?

    JB has provided no details.

    Comment by CPA Monday, Mar 4, 19 @ 3:22 pm

  31. Hey CPA- yea the issue is with the “more” part. As NJ is finding out once you have a progressive tax system there is no end to the increases. The Dem Gov today proposed increasing the top rats from 9 to 11 AND dropping the income threshold it applies to from 5 million to 1 million. Even his Dem legislative leadership is screaming.

    Comment by Sue Monday, Mar 4, 19 @ 3:53 pm

  32. == it was promised to remain a flat tax ==

    They put it in the State Constitution so it would be hard to change, not impossible.

    Unless you get it in writing in the Constitution that things can never change, you can’t count on government to keep promises.

    Comment by RNUG Monday, Mar 4, 19 @ 3:58 pm

  33. ===I will take the Republicans seriously when they list specific budget cuts to match the low taxes they insist on.===

    Instead of the nonsensical responses of “show us your budget cuts” and “we have the numbers, just ram it through,” I do believe the Republicans should come on board on this so-called “Progressive” Income Tax Constitutional Amendment by agreeing to it in exchange for a “Fair Maps” Constitutional Amendment. To prevent any double-crosses, by either or both parties, link the Amendments together on the ballot as a single question. Make sure both parts of the question specify what “progressive” and “fair maps” mean so the voters can intelligently make up their minds.

    Then there will be smiles all around. Who could possibly disagree?

    Comment by Louis G. Atsaves Monday, Mar 4, 19 @ 4:00 pm

  34. Louis, add a third question on term limits and a 4th question on the ERA and a fifth question on …

    Comment by don the legend Monday, Mar 4, 19 @ 4:12 pm

  35. – To prevent any double-crosses, by either or both parties, link the Amendments together on the ballot as a single question.–

    I think you’ve got a single-subject problem there, counselor.

    Comment by wordslinger Monday, Mar 4, 19 @ 4:21 pm

  36. ==there is no end to the increases==

    I don’t understand that as an argument against a progressive income tax system. You can raise the tax rate now.

    Comment by Demoralized Monday, Mar 4, 19 @ 4:23 pm

  37. Someone studied the reusable bags and noted that with each reuse for groceries, they got more and more contaminated with dangerous bacteria. I would ask for “double paper” if available. If paper bags are not available, I would just pay the 5 cents. The plastic shopping bags can be reused in small wastebaskets instead of plastic garbage bags.

    Comment by DuPage Monday, Mar 4, 19 @ 4:28 pm

  38. ==As NJ is finding out once you have a progressive tax system there is no end to the increases.==

    From NJ.com:
    “The millionaires tax was just a little over a year ago a foregone conclusion in New Jersey politics. Murphy promised to raise the income tax to restore “tax fairness” in the Garden State.”

    Prior to the millionaire’s tax on $5mil, the previous top tax bracket form $500K was 4-6 times greater than the bottom brackets.

    In other words, the quest for fairness is not only never-ending but relative.

    Comment by City Zen Monday, Mar 4, 19 @ 4:33 pm

  39. Demoralized- that’s my point. It’s much harder raising a flat tax as it hits everyone. With a progressive system once it’s in the temptation to keep gauging the upper income is ever present and as NY NJ CT learned the top income folks leave and you have to lower the income levels subject to the higher rates to raise sufficient revenue.

    Comment by Sue Monday, Mar 4, 19 @ 4:35 pm

  40. City Zen- you fail to mention the changes Gov Murphy proposed today raising the top rates 20 percent and reducing the income level it Pplies to from 5 to 1 million. His proposal even was criticized by his Dem legislative leaderxhip

    Comment by Sue Monday, Mar 4, 19 @ 4:47 pm

  41. Sue-

    We refer to that as a death spiral.

    Trying to balance the budget on the backs of a small group is precarious for the state, because losing even a few of those payers blows a huge hole in the budget if they decide to seek greener pastures.

    You then have to raise the taxes again on more people to make up for a few lost mega earners, and the cycle perpetuates.

    The real worry is that we have any kind of recession in the next 2 years that essentially makes trying to substantially raise taxes radioactive, while at the same time seeing materially lower revenues because of it.

    JB might throw up his hands and leave at that point as the state will be borderline ungovernable.

    We still have a massive structural deficit a decade into the longest expansion on record. Yet we are to believe that the problem has been not enough growth and revenues, despite the best growth environment on record essentially.

    I can only imagine what massive tax increases in the face of a recession is going to look like for this state, and it is a matter of when and not if.

    Comment by Anon Monday, Mar 4, 19 @ 4:48 pm

  42. There needs to be a tax swap from residential real estate to income. In addition to providing a break for lower income folks, it would likely have an immediate, positive effect on home values, and make it more likely that people will move up to larger homes or fix up the ones they currently own. Obviously, this would also require changing the school funding formula, which many would consider double-chocolate.

    Comment by Stuntman Bob's Brother Monday, Mar 4, 19 @ 4:58 pm

  43. The bag tax and all the discussion surround it is like playing small ball when you are down by double digit runs late in the game. Talking about raising $20 million in revenue when the State is in the hole by billions is ridiculous. A 5¢ tax per bag won’t kill anyone but will be enough to irritate many shoppers and give more life to “we are taxed too much ” theme. On the other hand if it changes behavior , it won’t bring in $20 million either and will still irritate many. I suggest that all talk about the bag tax be dropped immediately. Instead start talking about taxing retirement income. The GA could still pass legislation making all retirement income taxable a t the current 4.95% rate and make it retroactive to the Jan 1. The standard estimate of projected revenue raised is $2 billion. Could be more. That would be swinging for the fences and playing for a big inning . That would help us play catch up in a big way. Yes it would irritate many just as the bag tax would. It can’t be helped . If you are going to make people mad, make it for something worth while.

    Comment by Earl Hickey Monday, Mar 4, 19 @ 5:31 pm

  44. ===The GA could still pass legislation making all retirement income taxable===

    Theoretically, yes. But, theoretically, they could also pass a resolution declaring the moon to be made of green cheese.

    Comment by Rich Miller Monday, Mar 4, 19 @ 5:45 pm

  45. ===I think you’ve got a single-subject problem there, counselor.===

    Work. The. Problem.

    Comment by Louis G. Atsaves Monday, Mar 4, 19 @ 5:47 pm

  46. ===There needs to be a tax swap from residential real estate to income.===

    I agree.

    Comment by Louis G. Atsaves Monday, Mar 4, 19 @ 5:48 pm

  47. ===I think you’ve got a single-subject problem there, counselor.===

    Work. The. Problem.–

    What does that mean, in this context?

    You’re proposing one vote for two separate constitutional amendments — Article 4 and Article 9. How does that pass constitutional muster?

    Comment by wordslinger Monday, Mar 4, 19 @ 6:24 pm

  48. For anyone thinking an increase in the income tax will produce reduced property taxes hasn’t been paying attention. The State needs more revenue not just different ways to impact taxpayers. Talk to your Mayor or City managers and see if they can see reduced real estate taxes. Local pensions and local infrastructure is paid for thru property taxes. Truth is they are both going to keep going up and anyone who believes otherwise also believes in the Easter Bunny

    Comment by Sue Monday, Mar 4, 19 @ 6:52 pm

  49. == You’re proposing one vote for two separate constitutional amendments — Article 4 and Article 9. ==

    You don’t need to amend Article 9 to change how retirement is taxed. You don’t need a CA at all for just that change. Right now not taking retirement income is just an exemption allowed by the GA; that can be changed by the GA. The catch, should the GA decide to just partially tax retirement income, is what would be considered a reasonable exemption. Something in line with other existing deductions would probably be OK, large multiples of that probably would not be considered reasonable by a court.

    Here is the relevant information tax language in the IL Constitution. As you can see, the drafters left the language loose on exemption.

    ARTICLE IX …

    SECTION 2. NON-PROPERTY TAXES - CLASSIFICATION, EXEMPTIONS, DEDUCTIONS, ALLOWANCES AND CREDITS

    In any law classifying the subjects or objects of non-property taxes or fees, the classes shall be reasonable and the subjects and objects within each class shall be taxed uniformly. Exemptions, deductions, credits, refunds and other
    allowances shall be reasonable.
    (Source: Illinois Constitution.)

    SECTION 3. LIMITATIONS ON INCOME TAXATION

    (a) A tax on or measured by income shall be at a non-graduated rate. At any one time there may be no more than one such tax imposed by the State for State purposes on individuals and one such tax so imposed on corporations. In any such tax imposed upon corporations the rate shall not exceed the rate imposed on individuals by more than a ratio
    of 8 to 5.

    (b) Laws imposing taxes on or measured by income may adopt by reference provisions of the laws and regulations of
    the United States, as they then exist or thereafter may be changed, for the purpose of arriving at the amount of income upon which the tax is imposed.
    (Source: Illinois Constitution.)

    Comment by RNUG Monday, Mar 4, 19 @ 7:02 pm

  50. ===There needs to be a tax swap from residential real estate to income.===

    Easy-peasy, except that it would be the most complicated, regional, class and interest-fraught battle for the ages.

    Way back in the day, Rep. Jim Edgar proposed a local income tax option with the idea that it could be devoted to local property tax relief.

    That went nowhere in the GA. Now, do it on a statewide level.

    Comment by wordslinger Monday, Mar 4, 19 @ 7:02 pm

  51. ==Easy-peasy, except that it would be the most complicated, regional, class and interest-fraught battle for the ages==

    Never said it would be easy, but how the state collects and spends tax dollars is probably at the root of most of the other problems in the state. The only worse thing that comes to mind is the mis-management of the past, which allowed the state’s debt to balloon to where it is at today - but that’s water under the bridge, and all we’re left with is the fixing at this point.

    Comment by Stuntman Bob's Brother Monday, Mar 4, 19 @ 8:34 pm

  52. Note the Iowa calculations are for income tax only.

    The School District surcharge is a different tax paid by Iowa residents. It varies by county from 0% to 17% of income tax paid. If you paid 2000 in income taxes, add up to another 340 on top of that.

    Comment by TheInvisibleMan Monday, Mar 4, 19 @ 9:41 pm

  53. I’d pay Iowa’s income tax rates if I was paying Iowa’s property tax rates.

    Comment by Shemp Monday, Mar 4, 19 @ 11:54 pm

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