Illinois Senate gives thumbs up to voters having say on changing income tax structure
In a 40 to 19 vote, state Senators have given their thumbs up to a November 2020 vote on whether the state’s constitution should be changed to allow for a progressive income tax.
The state Senate also voted to approve tax rates, including a 7.99 percent rate for the state’s most affluent residents.
Illinois’ constitution currently mandates that there be a flat income tax in the state.
As a central part of his agenda, Gov. J.B. Pritzker has called for the state to switch to a progressive income tax system to structurally fill a $3.2 billion budget gap.
He said under rates he proposed, 97 percent of Illinois residents would either see their income taxes decrease or stay the same.
A constitutional amendment is needed to change the state from a flat income tax to a graduated income tax system. With the Senate voting in favor, now three-fifths of the House have to vote to put the amendment on the ballot.
Democrats have supermajorities in both chambers.
Then three-fifths of people voting on the amendment, or at least a simple of majority of those voting in the November 2020 election, need to vote in favor of the amendment, for the constitution to be changed.
State Sen. Harmon, D-Oak Park, called the flat income tax system archaic, and going to a progressive income tax.
“This is the next step in a decade’s long effort to modernize our tax code,” Harmon said.
State Sen. Chris Belt, D-Cahokia, supported the measure.
“We are one of the few states in the country to still have a flat tax. We’re losing residents every year and they’re going to neighboring states that have a fair tax system,” Belt said. “If we want to keep our residents in Illinois, we must adopt a fair tax or they are going to move to Minnesota, which is a leader in job creation because they have fair tax. It’s time for the wealthy in Illinois start paying their fair share and taxes be cut for working families’.”
State Sen. Bill Brady, R-Bloomington, said the current constitutional language protects the middle class.
“We believe our current constitution crafted by the 1970 constitutional convention wisely decided Illinois taxpayers need the protections against Illinois politicians,” Brady said.
Among those to vote no was state Sen. Paul Schimpf, R-Waterloo.
“Today’s Senate action continues to ignore the reality that Illinois politicians have an insatiable desire to spend more money and expand the size of government,” Schimpf said. “Changing our taxing structure, without providing a means to limit spending or make it more difficult to raise taxes in the future, solves nothing. In fact, this plan will most likely only lead to more tax increases and higher spending in the future. That is why I voted no.”
Here’s how it would work
Along with the proposed constitution amendment, a package of bills, which include proposed income tax rates also passed the senate.
The Senate version – included in Amendment 1 to Senate Bill 687 — raises the top income tax rate to 7.99 percent from 7.95 percent in the governor’s plan and separates the rate structures for single- and joint-filing persons. For single filers, the maximum rate kicks in at $750,001 and applies to every penny of income. For joint filers, that rate takes effect on earnings greater than $1 million, the same as in the governor’s plan.
The corporate tax rate would be raised to 7.99 percent as well, slightly higher than Pritzker’s proposed 7.95 percent increase from its current 7 percent rate. Businesses also pay a corporate property replacement tax, however, which makes the top corporate rate 10.49 percent under the Senate plan.
Outside of the top brackets, the marginal tax rates in the Senate plan are 4.75 percent from $0 to $10,000; 4.9 percent from $10,001 to $100,000; 4.95 percent from $100,001 to $250,000; 7.75 percent from $250,001 to $500,000 and 7.85 percent from $500,001 to $1 million.
For single-filing persons, tax rates are the same up to $250,000, while the 7.75 percent rate applies from $250,001 to $350,000 and the 7.85 percent rate applies from $350,001 to $750,000.
The tax rates would bring in $3.325 billion worth of new revenue, according to senate estimates.
“From day one, Governor Pritzker has made clear that he prioritizes negotiations with the General Assembly on the fair income tax,” spokesperson Jordan Abudayyeh wrote. “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.”
Bill would repeal the estate tax
The package of bills included a repeal of the estate tax.
Currently estates worth at least $4 million in the state and are transferred when the owner dies would be subject to a 40 percent tax.
“I find it more than ironic that a man who inherited his wealth is potentially going to sign into law a bill that will help those millions and billions in his case avoid paying taxes,” said state Rep. Grant Wehrli, R-Naperville during a news conference on Wednesday.
Also included in the package is a freeze on property taxes for school district for a year 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. Property taxes for schools would remain frozen if the state continues to meet funding levels.
The Illinois Capitol News Bureau and the Associated Press contributed to this report.
How they voted
State Sen. Christopher Belt, D-Cahokia: Yes
State Sen. Rachelle Crowe, D-Glen Carbon: Yes
State Sen. Jason Plummer, R-Edwardsville: No
State Sen. Paul Schimpf, R-Waterloo: No
Belt: Yes
Crowe: Did not vote
Plummer: No
Schimpf: No
School District Property Tax Freeze
Belt: Yes
Crowe: Yes
Plummer: No
Schimpf: No
Belt: Yes
Crowe: Yes
Plummer: No
Schimpf: No
This story was originally published May 1, 2019 at 2:52 PM.
