As part of their November 3 Presidential Election ballot, voters across the State of Illinois will decide on an amendment proposing to change Illinois’ Constitution to allow state lawmakers to adopt a graduated income tax formula over the current flat tax rate.
“Fair Tax” proponents favor those who earn more to pay more, or their fair share, while opponents—the Illinois Chamber of Commerce, Illinois Policy Institute, business associations and others—fear that the amendment will hand legislators a “blank check” on income tax hikes for all residents down the road.
Since income tax was first instituted in 1969 (then only 2.5%), our Constitution has mandated that any income tax must be imposed at a single rate (currently 4.95%) for all individual taxpayers, regardless of their income.
The amendment will need either the approval of 60 percent of voters voting on the question, or greater than 50 percent approval from all voters who cast election ballots.
As proposed, taxpayers earning more than $250K annually will pay the higher rates of 7.75%, 7.85% ($350K) and 7.99% ($1 million), while an estimate 97% percent of residents will pay 4.95% or even less. The corporate tax rate will increase to 7.99%, up from seven percent (not counting a 2.5% replacement tax).
Guestimates on increased income tax revenue are at $3.6 billion from individuals and $350 million from businesses versus Illinois’ $6 billion-plus in unpaid liabilities.
Illinois’ flat rate ranks lower than bordering states Iowa (8.53%), Wisconsin (7.65%), Missouri (5.40%) and Kentucky (5%), with only Indiana (3.23%) lower, and compares favorably among 43 states that levy individual income taxes.
Illinoisans pay the nation’s second-highest property taxes (New Jersey ranks No. 1) at $2.4K for every $100K in home value and the average state and local sales tax burden in Illinois is 8.78 percent, according to a study by Kiplinger, a financial forecasting service.