Illinois’ Graduated Income Tax Amendment Explained

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Beyond the national attention of the presidential election, Illinois voters have been hearing about the graduated tax amendment for months.

A prime issue at the top of the ballot, listed above the choices for President and Congresspeople is this question:

“The proposed amendment grants the State authority to impose higher income tax rates on higher income levels, which is how the federal government and a majority of other states do it.”

The question continues: “The amendment would remove the portion of the Revenue Article of the Illinois Constitution that is sometimes referred to as the ‘flat tax,’ that requires all taxes on income to be at the same rate. The amendment does not itself change tax rates. It gives the State the ability to impose higher tax rates on those with higher income levels and lower income tax rates on those with middle or lower income levels. You are asked to decide whether the proposed amendment should become a part of the Illinois Constitution.”

The language isn’t clear to many voters, and Christopher Mooney, a state politics professor at the University of Illinois-Chicago, agrees.

“If you got the vote by mail ballot already as many, many people have, you take a look at that thing, it’s almost confusing. What is that doing there? What does this mean? What is this language talking about?” Mooney said.

The question regards language in the Illinois Constitution mandating that any income tax be imposed at a single rate (or flat tax) for everyone regardless of their income level.

Voters will decide on whether to replace Illinois’ flat income tax with a graduated structure. A vote in favor of the amendment ends the single-rate system.

For individuals, Illinois’ flat tax is currently 4.95 percent. The flat tax rate of 4.95% applies to all residents regardless of income, and has been in the Illinois Constitution since 1969.

As Illinois faces a massive bill backlog, unfunded pension liabilities and a dismal credit rating, Gov. J.B. Pritzker is looking to collect more revenue.

“They were looking for a place to find some more money, and it’s like Willie Sutton said, ‘You go where the money is and that’s where the rich people are,'” Mooney said.

Pritzker calls it “The Fair Tax,” and it’s his signature agenda item since taking office in January 2019.

Shortly after taking office, Pritzker successfully urged the Democratic-controlled legislature to approve placing the graduated income tax amendment on the ballot. Lawmakers also signed off on the new graduated tax rates.

The graduated tax rates that were approved were:

  • $0-$10,000: 4.75%
  • $10,000-$100,000: 4.90%
  • $100,001-$250,000: 4.95%
  • $250,001-$350,000: 7.75%
  • $350,001-$750,000: 7.85%
  • $750,001+: 7.99%

The rates for married couples are listed below:

  • $0-$10,000: 4.75%
  • $10,001-$100,000: 4.90%
  • $100,001-$250,000: 4.95%
  • $250,001-$500,000: 7.75%
  • $500,001-$1,000,000: 7.85%
  • $1,000,001+: 7.99%

Illinois corporations currently pay a 7 percent statewide tax rate, which would tick up to 7.99 percent under the rates signed off by lawmakers. The rate is in addition to the 2.5 percent personal property replacement tax corporations pay.

New rates would take effect on January 1, 2021 if the amendment were to pass.

Kristan Vaughn owns and operates several Irish pubs throughout the city and suburbs, including Corcoran’s. She’s voting no on the amendment.

“When the graduated tax, if it comes in, there’s not enough of them to go after that they won’t come after me,” Vaughn said.

Vaughn said she is not necessarily opposed to taxing the wealthier more, but has seen her business struggle and has had to lay off dozens.

“It’s not a good time to be raising taxes on anybody,” Vaughn said.

Supporters of the amendment say regardless of the pandemic, revenue is needed because the current tax system is not fair. They also highlight the tax cut under the approved rates that individuals making $100,000 or less would receive.

Quentin Fulks runs VoteYesForFairness, aiming to get Illinois on board with the graduated tax amendment.

“The taxation that we have in the state of Illinois is simply regressive and it’s punishing lower and middle income Illinoisans, and it’s time we do something to lift that burden off of them,” Fulks said.

Former Illinois Comptroller Leslie Munger paid the state’s bills in that role, at least the ones the state was able to cover. Even though Munger acknowledges Illinois’ fiscal issues, she opposes the amendment.

“These tax rates are like an introductory teaser rate that we see from our local cable company. They look like they’re not going to get taxed until they rope you in and you vote for it,” Munger said.

This is a primary argument opponents make, that a graduated tax system will open the door to Springfield raising taxes at will.

Supporter Quentin Fulks was asked why supporters did not want rates put in the amendment.

“It’s simple because the rates are determined by the General Assembly as they are now. They can decide to go in and change those rates whenever they decide under a flat tax or under a fair tax, and so the rates simply isn’t what is in front of voters on November 3,” Fulks said.

Mooney says opponents have an advantage because the amendment requires trust in the state government.

“The problem with that and the advantage that the opponents have is that this requires trust. Trust is in short supply for the state of Illinois government,” Mooney said.

Opponents have also warned seniors, who have said the amendment could lead to a tax on retirement income, which is currently banned by state law.

“It’s a lie. The Fair Tax has nothing to do with taxing retirement income,” Fulks said.

The state would have to pass a new law authorizing a tax on retirement income, making that topic speculation for now.

As for the campaigns for and against the amendment, it is a heavyweight battle between two Illinois billionaires.

Governor Pritzker is largely helping fund Fulks’ committee, injecting $55 million of his own money to the organization.

On the other side, hedge fund manager and Illinois’ wealthiest man Ken Griffin has penned $46 million in checks to the ‘Coalition to Stop the Proposed Tax Hike Amendment.’

Griffin wrote an op-ed in the Chicago Tribune warning that the amendment could slow the state’s economic growth. Griffin did not mention that the amendment’s passing could cost him millions.

Alisa Kaplan of Reform for Illinois does not like how the conversation on the amendment is dictated.

“Basically 99 percent or more of the funding is coming just from these two extremely wealthy white men who are controlling the conversation about this issue,” Kaplan said.

Home health care worker Patricia Evans said she will be voting yes on the amendment, and feels cheated that she pays the same tax rate as the state’s richest person.

“When someone very, very wealthy is saying they want to do something to save you but for them, it’s a tremendous amount of money, you need to ask yourself why? Why are they spending billions of dollars so that I can save a couple hundred bucks?” Evans said.

The estimated $3.4 billion in annual revenue that the amendment would generate wouldn’t solve the state’s problems, as the state is facing $130 billion in pension liabilities.

Pritzker said he wants to use $200 million per year towards the massive pension debt.

Lieutenant Governor Juliana Stratton sounded the alarm before the state mailed ballots to voters, warning if the amendment does not pass, all residents could see a tax hike of 20 percent.

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