Capitol Fax.com - Your Illinois News Radar


Latest Post | Last 10 Posts | Archives


Previous Post: The Credit Union Difference
Next Post: IDOT takes signage to the next level

#TaxSplaining: Stop scaring people with marginal tax rates

Posted in:

* Wirepoints

Oh, the places they’ll go: The impact of Pritzker’s progressive tax on wealthy Illinoisans

You have to wonder if Gov. J.B. Pritzker ever saw the top marginal tax rates of other states before he released his new progressive tax plan. If he gets his way, he’ll give wealthy Illinoisans another big reason to leave the state. […]

His new tax hike will be just another huge incentive for the wealthy to take up residence elsewhere. They’ll get a far better deal on their income taxes if they do. […]

Pritzker says Illinois is an outlier because it remains a flat tax state even though 30-plus other states have a progressive tax structure. But with his tax plan, Illinois will become an outlier among progressive tax states for how much it taxes residents with $250,000 incomes and above.

North Dakota, Arizona, New Mexico, Ohio, Alabama, Mississippi, Oklahoma, Kansas, Maryland, Virginia, Missouri, Rhode Island, Georgia, Louisiana, West Virginia, Iowa (by 2023), Delaware, Nebraska, Arkansas, Montana, Connecticut, South Carolina, Maine, Idaho and Wisconsin all have progressive structures with lower tax rates on $250,000-plus incomes compared to Illinois under the Pritzker plan.

Even New Jersey and New York’s rates, which are some of the highest in the nation, would be less painful for residents earning $250,000 to $500,000 ($250,000 to $1 million in New York’s case).

* OK, so I used the Tribune’s new online calculator for Pritzker’s proposed graduated tax (as I mentioned earlier today, the Trib tells you what you will owe, while the governor’s calculator only tells you how much less or more you’d pay) and plugged in an income of $251,000 for a single person with no exemptions and got $12,387 in income taxes owed, not including the increased property tax credit.

Next, I used the SmartAsset.com calculator and plugged in that same $251,000 income for the states listed above (excluding Iowa).

States with significantly lower effective graduated rates…

North Dakota: $5,047

States with somewhat lower effective graduated rates…

Alabama: $9,443
Louisiana: $9,920
Arizona: $9,988
New Mexico: $11,510
Rhode Island: $11,896
Mississippi: $11,985
Oklahoma: $11,994

* The rest…

Illinois: $12,387
Kansas: $13,550
Missouri: $13,582
New Jersey: $13,799
Virginia: $13,949
Connecticut: $14,369
Georgia: $14,432
West Virginia: $15,060
Delaware: $15,335
Ohio: $9,842 (plus $5,499 in local income tax for Cincinnati)
Wisconsin: $15,385
Nebraska: $15,825
Maine: $15,885
Montana: $15,952
Arkansas: $16,253
South Carolina: $16,330
Idaho: $16,402
Maryland: $12,705 (plus $6,374 local income tax for Annapolis)
California: $20,187
New York: $15,536 (plus $9,294 in local income tax for NYC)

As far as flat tax states go, if you live in North Carolina, your tax bill would be $13,321 (higher than Illinois). In Frankfort, Kentucky, your effective income tax would be $12,424 (higher than Illinois) plus another $7,405 in local income taxes. If you live in Detroit, Michigan, you’d pay $10,495 and then another $6,010 in local income taxes. In Utah, your income tax bill would be $12,425 (higher than Illinois). In Massachusetts, it’s $12,577 (higher than Illinois). Indianapolis residents pay $8,075 state income tax and $4,050 local income tax. Philadelphia, PA residents pay $7,706 to the state and $9,849 to Philly. Coloradans pay $11,621 (about $800 less than they’ll pay here if this passes muster).

* Now, you could plug in higher incomes and you might get some different results, but I didn’t set the parameters of this “debate,” they did. Also, I’m done crunching numbers for a bit.

Point being, nobody who bases any sort of intelligent decision on whether to move is gonna look at marginal tax rates. And, frankly, most people don’t move based on this topic in the first place. Click here for just one example.

posted by Rich Miller
Tuesday, Mar 12, 19 @ 8:30 am

Comments

  1. Exactly Rich
    I feel the same way
    about wealthy who would move
    because of taxes
    as I do about coworkers
    who want to not pay union dues.
    Bye Felicia

    Comment by Honeybear Tuesday, Mar 12, 19 @ 8:36 am

  2. If it were only the increased tax burden, I don’t think people would consider leaving either. Frankly, it’s the crushing level of existing debt and cascading effect of future pension benefits that has anyone with a moderate level of financial knowledge looking at this state in horror.

    Pritzker would provide a sense of calm if he would also talk about critical spending cuts. The fact that the tax increase was introduced without any fiscal restraints is more than troubling.

    Comment by Downstate Tuesday, Mar 12, 19 @ 8:37 am

  3. Wow, if I can save $400 on my taxes, I’m moving to Oklahoma. Two earthquakes a day is worth the trade off.

    Comment by City Guy Tuesday, Mar 12, 19 @ 8:41 am

  4. But but but… the sky is falling! And if Pritzker’s not the cause, something else must be.

    Comment by Anonymous Tuesday, Mar 12, 19 @ 8:41 am

  5. It’s embarrassing, those who choose to reveal in writing that they are too thick to grasp the concept of effective tax rates.

    You’re getting it wrong. And it’s not a heavy lift, at all.

    Comment by wordslinger Tuesday, Mar 12, 19 @ 8:42 am

  6. The problem with making comparisons with just a state income tax is: there’s more to taxation at the state level than income tax. You are sales taxes, real estates taxes, and yearly care stickers.

    Comment by Steve Tuesday, Mar 12, 19 @ 8:44 am

  7. Agree…it’s not all about the tax rate, marginal or otherwise.

    “An analysis of earnings data for the Chicago region’s native- and foreign-born populations reaffirms the loss of lower-income residents. The number of people in the Chicago region age 16 and older earning less than $25,000 decreased by roughly 30,000 and 80,000 for the native- and foreign-born populations, respectively, between 2006-16. In contrast, the native- and foreign-born populations, respectively, added more than 300,000 and 80,000 people earning $75,000 or more.”

    See the last graph in this report for illustration.

    https://tinyurl.com/y6ykbwwb

    Comment by Anon221 Tuesday, Mar 12, 19 @ 8:44 am

  8. Downstate - I disagree. People who follow this blog and who are always tuned into state government think about Illinois’ level of debt, the bill repayment delays, the pension debt. The average citizen of Illinois did not get up this morning and immediately start obsessing about these issues. They have lives to live!

    Comment by OutHereInTheMiddle Tuesday, Mar 12, 19 @ 8:45 am

  9. You somehow forgot to mention two of the main destinations these days for businesses and higher income individuals: Texas and Florida

    Comment by Anonymous Tuesday, Mar 12, 19 @ 8:46 am

  10. Rich, I appreciate your effort to put this issue in context. But I wonder if you have ever heard the old political maxim that “if you’re explaining, you’re losing.”

    Comment by jim Tuesday, Mar 12, 19 @ 8:49 am

  11. “Two earthquakes a day is worth the trade off.” Don’t forgot about the tornadoes.

    Comment by Skeptic Tuesday, Mar 12, 19 @ 8:50 am

  12. I think people look at taxes combined: other states may pick up more of the education burden, reducing local taxes. On the other hand, a better quality of life (either selfish things like better parks/roads/etc. or more civic minded things like a stronger safety net) can make people more willing to stay. The rich pay much higher taxes and cost of living expenses to live on the California coast.

    Pritzker’s plan is modest and appealing - I just wish it was accompanied by some belt-tightening. He said in that initial release that the alternative was cutting state spending 15% - nothing says you can’t raise taxes and cut spending at least a little.

    Comment by lake county democrat Tuesday, Mar 12, 19 @ 8:51 am

  13. ==it’s the crushing level of existing debt and cascading effect of future pension benefits.==

    Which could have been avoided if we were taxed at proper levels in the late 80’s and 90’s…not to mention BVR (and the GOP) shirking their responsibility to budget for three of the past four years.

    Comment by Jocko Tuesday, Mar 12, 19 @ 8:53 am

  14. Should I stay or should I go?

    For many so called wealthy Illinois households it isn’t even a realistic question. They have to stay. Their jobs are here and their families are here.

    Retirees, which in some cases fall into the defined wealthy bucket of $250,000+, get a free ride, at least in terms of income taxes. They can get a second place in a warm weather climate, but why leave when the state leaves your income alone?

    There aren’t that many people who would want to leave, and have the ability to do so. So I wouldn’t expect a mass exodus.

    Comment by SSL Tuesday, Mar 12, 19 @ 8:53 am

  15. ==if you’re explaining, you’re losing.==
    So Wirepoints is losing?

    Comment by Da Big Bad Wolf Tuesday, Mar 12, 19 @ 8:54 am

  16. ===ever heard the old political maxim===

    Um, it’s my job to explain things. I’m not running for anything. It’s also my job to call out lies and to mock people like yourself. lol

    Comment by Rich Miller Tuesday, Mar 12, 19 @ 8:55 am

  17. …Actually, that last part is just a fringe benefit.

    Comment by Rich Miller Tuesday, Mar 12, 19 @ 8:55 am

  18. North Dakota has a state bank. That’s got to save them some money.

    Comment by Da Big Bad Wolf Tuesday, Mar 12, 19 @ 8:56 am

  19. I agree with the idea behind the LA Times article, especially the issue of establishing clients. If you are making upwards of $250k, you are likely a medical, legal, or financial professional. Those professions have established clients.

    If you were a CPA, for example, would you pack up and leave your established client base to save a few thousand in taxes? Good luck in Texas trying to grab clients from established CPAs in that area.

    Comment by A Jack Tuesday, Mar 12, 19 @ 8:58 am

  20. Stop switching times twice a year. That’s been proven to cost a bunch of money.

    Comment by Da Big Bad Wolf Tuesday, Mar 12, 19 @ 9:01 am

  21. There will be some people that move, but probably not a lot and certainly the state will collect more revenue. People are sensitive to tax rates and if they weren’t, Illinois would have raised rates a long time ago. A little nuance from both sides would be appreciated.

    Comment by Chicagonk Tuesday, Mar 12, 19 @ 9:01 am

  22. ===Stop switching times===

    Which reminds me that I once again forgot to change the time zone on the blog this year. Oops.

    Comment by Rich Miller Tuesday, Mar 12, 19 @ 9:02 am

  23. ==if you’re explaining, you’re losing.==

    Rauner rarely explained anything beyond a few buzzwords and he lost bigly.

    Comment by Cubs in '16 Tuesday, Mar 12, 19 @ 9:05 am

  24. I wish we would stop ignoring the extremely high real estate and sales taxes in these discussions.

    Comment by Platon Tuesday, Mar 12, 19 @ 9:06 am

  25. “if you’re explaining, you’re losing.”

    Yes, the folks tying themselves into knots explaining why the progressive tax is a bad idea…..

    Comment by a drop in Tuesday, Mar 12, 19 @ 9:07 am

  26. Anyone care to guess which city has the most billionaires in the world? Chicago doesn’t make the top ten, but neither does Miami.

    Comment by Angry Republican Tuesday, Mar 12, 19 @ 9:18 am

  27. Wirepoints is getting so tiresome with this nonsense. But they have to fight harder now that 97% are getting the same or lower taxes so expect more BS to come.

    Comment by Chicago Cynic Tuesday, Mar 12, 19 @ 9:20 am

  28. There is another perspective out there which routinely gets ignored when we argue about increasing taxes on one item or another.

    When talking about moving out or retiring and moving out, I think it is more appropriate to discuss the cumulative nature of taxes in each state, instead of cherry picking to income taxes only.

    In the last year in three different road travels, I was stunned to see homes larger than mine paying $6,000 to $8,000 a year less in property taxes. Add lesser as a rule gas taxes, lesser sales taxes (which are assessed on each gallon of gas by the way), lesser sin taxes, just to name a few and then rank the states. And yes, they have milder weather than our state.

    A retiree on a fixed income over a span of 15-20 years would save $90,000 to $120,000 during that period just on property taxes.

    OK, this is just a stupid argument coming from a stupid person, I guess.

    Comment by Louis G. Atsaves Tuesday, Mar 12, 19 @ 9:27 am

  29. –I wish we would stop ignoring the extremely high real estate and sales taxes in these discussions.–

    LOL, yeah, those subjects never come up. What do you think — is it the Illuminati or the Bilderberg Group behind the sinister plot to “ignore” them?

    Dude, make an effort in your search for grievances.

    Comment by wordslinger Tuesday, Mar 12, 19 @ 9:38 am

  30. Looking at the tax calculator, my income taxes will increase about 25%. The problem with this is, there is very little benefit to my family from the already high levels of taxation, so this is really infuriating.

    Comment by Platon Tuesday, Mar 12, 19 @ 9:41 am

  31. Others have already said it: it isn’t just the state income taxes, it is all the other taxes and the lack of trust (Rich has said it) that once the constitution is changed, the rates won’t be jacked up again.

    Also, I am attending a lunch meeting with hundreds to listen to the topic: “Changing Residency from Illinois for Business Owners, Executives and Retirees”

    Comment by 32nd Ward Roscoe Village Tuesday, Mar 12, 19 @ 9:42 am

  32. “Stop switching times twice a year. That’s been proven to cost a bunch of money. ”

    Not to go off topic, but why can’t this become a reality? Five years in Arizona without the change was glorious.

    Comment by Libertarian Tuesday, Mar 12, 19 @ 9:43 am

  33. I was absolutely wrong. I over reacted and deserve the shame. I think most reasonable people get we need to raise taxes. It’s the lack of making any real progress on our debt the last time we raised the rate. JB needs to show cuts and restraint, and we can get on the right track. We have heard the sky is falling so long, I am worried it’s lost it’s point. Especially the way things get kicked down the road.

    Comment by BenFolds5 Tuesday, Mar 12, 19 @ 9:49 am

  34. Rich- any state by state comparisons are meaningless absent factoring it the Abhorrently high RE tax bill property owners are subject to. When you add sales tax along with our RE tax Illinois will be at the top of the heap for folks at the 250 income level with the exception of maybe NY

    Comment by Sue Tuesday, Mar 12, 19 @ 9:54 am

  35. If 97% of folks paying less on their income taxes is infuriating to you, then I don’t know what to tell you. Most folks will see SOME relief, and that’s a good thing for the people in this state as a whole.

    The folks pushing this narrative that this is a bad thing are either drinking the koolaid or are being paid by folks from the 3% who will see an increase and don’t want that.

    Comment by Fixer Tuesday, Mar 12, 19 @ 9:56 am

  36. I guess here’s the rub with me: You can’t really compare income tax rates by state without taking property tax burden into consideration. Yes, some states might have a higher income tax rate compared to Illinois, but chances are their property taxes are much lower (mostly). It does matter. For example, IL does not fund education as it should at the state level- so property taxes go up as a result. Income and property taxes are interconnected.

    Comment by West Town TB Tuesday, Mar 12, 19 @ 9:58 am

  37. == any state by state comparisons are meaningless==

    You can make the argument using any criteria you want and you are always going to use the data that supports the opinion you already have.

    If you believe property taxes are high (and they are) then advocate for an even bigger increase in the income tax and a reduction in the property tax. Because that’s what is required to reduce property taxes.

    Comment by Demoralized Tuesday, Mar 12, 19 @ 10:01 am

  38. —The average citizen of Illinois did not get up this morning and immediately start obsessing about these issues—-

    No, but many of the job creators are obsessing over this very issue. See 32nd Ward’s post at 9:42 am.

    Comment by Downstate Tuesday, Mar 12, 19 @ 10:05 am

  39. Can’t compare the rates in a vacuum. All those states are paying less in property taxes because their state taxes are actually paying for things like education.

    Comment by Shemp Tuesday, Mar 12, 19 @ 10:16 am

  40. ==Anyone care to guess which city has the most billionaires in the world?==

    I’d have to guess NYC. So we should raise taxes even higher AND have Chicago institute a local income tax so we get more billionaires?

    Comment by NorthPark Tuesday, Mar 12, 19 @ 10:21 am

  41. “The rich are going to move” is just an old scare tactic. Let us please give it the proper disposal. It’s quite fair that Illinois gets more revenue from those who can more easily afford it, and is easier on those who can less afford it, like higher ed students, social services recipients and state workers.

    As far as local taxes, the wealthy have the flexibility to shop around for more favorable property taxes and buy in bulk for reduced sales taxes. Plus, corporations who make Chicago metro number one year after year for relocations are fine with property taxes and other local taxes.

    Comment by Grandson of Man Tuesday, Mar 12, 19 @ 10:25 am

  42. Of the states listed under “the rest”, I calculated each state’s property tax on a $400,000 home based on the effective real estate tax rates provided by Wallethub.

    Basically, the guy in our example would pay, on average, around $4,700 more in property taxes than those states. Under these assumptions, Colorado and the Carolinas look mighty tempting. NJ and CT, not so much.

    Comment by City Zen Tuesday, Mar 12, 19 @ 10:32 am

  43. –No, but many of the job creators are obsessing over this very issue.–

    97% of the job creators will be get an income tax cut.

    Comment by wordslinger Tuesday, Mar 12, 19 @ 10:33 am

  44. What makes me so angry is the lack of effort on the part of opponents. All we get from the gop, trib and commenters like roscoe village and Sue up there is “this is a bad plan because X might happen” or “X tax is also bad” or “I don’t trust politicians”. Stop telling us the reasons why you don’t like this plan, tell us what alternative you propose. These are serious problems that have to be solved, and JB seems to be the only one willing to offer an actual solution beyond “move to another state”. Rauner had four years and never offered anything beyond clearly unconstitutional pension cuts and things that had nothing to do with taxation, like term limits and redistricting reform. For Pete’s sake lead, follow or get out of the way

    Comment by Lester Holt’s Mustache Tuesday, Mar 12, 19 @ 10:42 am

  45. In regards to the importance of considering the total tax package (sales, property, income, etc). If you want to do a true comparison, you should also look at the average incomes and level of services. How many people with incomes over $250k can make that salary in North Dakota, Alabama, Louisiana, Arizona, New Mexico, etc? Then look at the quality of schools, health care, transportation, cultural facilities etc. in those states.

    Comment by Anonymous Tuesday, Mar 12, 19 @ 10:52 am

  46. =Stop scaring people=

    You’re taking away the IPI’s main tactic.

    Comment by A 400lb. Guy on a bed Tuesday, Mar 12, 19 @ 10:59 am

  47. The people in communities with higher property taxes want the best education for their children and are willing to pay for it.

    Comment by Enviro Tuesday, Mar 12, 19 @ 11:47 am

  48. @NorthPark ding ding ding ding. We have a winner; NYC is indeed the home to the most billionaires in the world.

    Income taxes are only one variable that people use when deciding where to live. In case you missed it, the GOP is no longer the party of the rich, that honor goes to the Democratic party. Wealthy Democrats can put their money where their mouth is.

    Comment by Angry Republican Tuesday, Mar 12, 19 @ 12:03 pm

  49. ==The people in communities with higher property taxes want the best education for their children and are willing to pay for it.==

    When the state provides maybe 15% of your school district’s budget, it’s more compulsory than willingness.

    Comment by City Zen Tuesday, Mar 12, 19 @ 12:03 pm

  50. I never hear anybody talking about leaving and mentioning taxes, does anybody here?

    Comment by Driveby Tuesday, Mar 12, 19 @ 12:16 pm

  51. Make it harder to raise rates on a progressive income tax, in the amendment proposal, for the constitution. Then see if the politicians still agree. If not, it is not what Illinois needs. Once it passes, without constraints on raising rates, the politicians will go on a spending spree.

    Comment by Anonymous Tuesday, Mar 12, 19 @ 12:41 pm

  52. –There is another perspective out there which routinely gets ignored when we argue about increasing taxes on one item or another.–

    Every day, someone brings up other taxes in relationship to the income tax.

    And every day, some who obviously don’t read the comments claim “everyone is ignoring other taxes” in relationship to the income tax.

    Seriously. Every. Day.

    Comment by wordslinger Tuesday, Mar 12, 19 @ 1:08 pm

  53. I agree with the new proposed tax structure, but also agree with those concerned about people leaving the State because of taxes (all taxes: property, sales, license plates, city stickers, parking meters, tolls, red light cameras… ). In the last two years I know four families that have moved to Wisconsin for those very reasons. Two were consultants who could work anywhere, one commutes to her business in Northbrook, and one looked for a new job before moving.

    Comment by Groucho Tuesday, Mar 12, 19 @ 1:49 pm

  54. === Driveby - Tuesday, Mar 12, 19 @ 12:16 pm:

    I never hear anybody talking about leaving and mentioning taxes, does anybody here?===

    Don’t take the comment section here as representative of Illinois as a whole.

    Comment by Shemp Tuesday, Mar 12, 19 @ 1:58 pm

  55. I’ve heard people comment before that consultants can work anywhere. But the reality is most benefit from being close to a major hub airport and a major customer base. I don’t know of many consultants that never travel or interact with customers.

    I can save money on housing if I move to an exurban community. But the higher daily cost of transportation and more critically the time lost while commuting makes it penny wise, pound foolish in my mind.

    Comment by City Guy Tuesday, Mar 12, 19 @ 2:44 pm

  56. Consultants also don’t like being taken advantage of. May as well live in California for much better weather and scenery.

    Comment by Platon Tuesday, Mar 12, 19 @ 3:05 pm

  57. Changing Residency from Illinois for Business Owners, Executives and Retirees”

    Ah, ya didn’t read the description of the topic. It’s about trust residency and cases coming before the court that might effect that.
    NOT about graduated income tax

    Obfuscation…..although I have to admit I took the bait till I googled it.

    Go ahead
    if you’re loyal to nothing
    except your money
    I’d rather not call you an Illinoisan
    I chose to stay
    and make things better.

    I pay my union dues
    and I pay my taxes.

    Comment by Honeybear Tuesday, Mar 12, 19 @ 3:13 pm

  58. Being loyal to one’s own family (and wamtei your money to provide for that family) is much more noble than being loyal to a state that has not earned any respect.

    Comment by Platon Tuesday, Mar 12, 19 @ 4:07 pm

  59. Illinois should look at changing it’s reciprocal state income tax law while we are at it.

    Comment by Chicagonk Tuesday, Mar 12, 19 @ 4:16 pm

Add a comment

Sorry, comments are closed at this time.

Previous Post: The Credit Union Difference
Next Post: IDOT takes signage to the next level


Last 10 posts:

more Posts (Archives)

WordPress Mobile Edition available at alexking.org.

powered by WordPress.