With tax season approaching, millions of Illinoisans won’t be seeing a bump up in a widely used state tax credit known as the standard exemption after lawmakers throttled a planned increase in the credit for the 2023 tax year.
Tucked within a 558-page revenue package, the little-noticed tax change came about last spring with passage of the state budget omnibus package approved by the Democratic-led General Assembly and enacted by Democratic Gov. JB Pritzker.
The freeze in the exemption, coming a year after the biggest jump in inflation in four decades, resulted in as much as $114 million in savings for the state – money that went from taxpayers’ pockets to a series of other legislative spending add-ons.
And no one is taking credit – or blame – for the little-publicized change nor committing to reimpose the savings for taxpayers.
Prior to the 2023 tax year, the standard exemption increased 10 times under an automatic escalator tied to inflation put into effect in 2012 by former Democratic Gov. Pat Quinn, who served as the state’s chief executive between 2009 and 2015. The change roughly a decade ago had overwhelming bipartisan support in the legislature.
But the standard exemption will remain flat this tax-filing season at $2,425 for those who declare adjusted gross income of $250,000 or less individually or $500,000 or less for married couples.
State revenue officials say more than 11 million Illinoisans claim the standard exemption on their taxes each year. Because of the inflation-indexing mechanism, the exemption has risen from $2,000 to $2,425 since 2011.
Had lawmakers and the governor not put a pause on that inflationary adjustment, the standard exemption would have stood at $2,625 for tax year 2023. That $200 increase would have marked the largest jump in the exemption since the inflationary index was enacted. That’s because the nation’s consumer price index increased 8% in 2022 – the largest inflationary move since 1981.
By WBEZ’s calculations, the state income tax obligation for a married couple with two minor children and adjusted gross income of $150,000 would be $39 higher than it would have been this tax year had the standard exemption tracked the rate of inflation in 2023.
The current law states that the inflationary index will be reimposed for tax year 2024. But it promises to come with a significant price tag – approximately $200 million, according to an estimate by the legislature’s non-partisan budget arm, the Commission on Government Forecasting & Accountability.
Quinn learned of the change only recently and is now calling on lawmakers to immediately undo it. He said the change is a smack at taxpayers, considering lawmakers made it while giving themselves pay increases in the Fiscal 2024 state budget.
“I thought it was a tax grab that was unfair and sneaky, and I fought very hard when I was governor to make sure that this personal exemption would be indexed to inflation every year,” Quinn told WBEZ.
“It’s got to be corrected. There’s something wrong here. It’s really unfair to everyday people to see their taxes go up while politicians raise their pay and give themselves cost-of-living increases,” he said.
However, the offices of the governor, House speaker and Senate president would not commit to reinstating the rate-of-inflation increase.
Nor would anyone publicly name names when WBEZ asked who initially came up with the idea of suspending the inflationary adjustment, though a Pritzker spokeswoman signaled the concept originated among Democrats in the legislature.
“The governor proposed his budget in February, and this provision was not in his proposed budget,” Pritzker spokeswoman Jordan Abudayyeh said in a prepared statement to WBEZ.
“The governor does not always support every single provision of the General Assembly’s budget, but as long as the budget is balanced and includes the investments the governor outlines in his proposed budget that are important to moving the state forward, he signs it into law,” she said.
“We’ve spent five years repairing the damage from the previous governor’s fight with the General Assembly, and Gov. Pritzker understands that responsible governing requires compromise,” Abudayyeh said.
The office of House Speaker Emanuel “Chris” Welch, D-Hillside, didn’t accept authorship of the provision, though it was contained in negotiated legislation that initially moved out of the House.
Welch spokeswoman Jaclyn Driscoll said reinstituting the inflationary index for the standard exemption will be part of negotiations for the Fiscal 2025 state budget next spring.
“As far as any future considerations, that will be discussed in the upcoming session,” she said.
Senate President Dan Harmon’s office offered little clarity on the issue.
“This was part of a negotiated revenue omnibus and a balanced budget,” said John Patterson, a spokesman for the Oak Park Democrat. “I do not know where the idea originated.”
Emails obtained through an open-records request to Pritzker’s budget office show that a Senate Democratic staffer appeared to initially raise freezing the standard exemption as the revenue omnibus was being negotiated last May between the offices of the governor, Senate president and House speaker.
Quinn said that lawmakers will be failing taxpayers if they don’t reinstitute the higher standard exemption before the April 15th, 2024, tax-filing deadline.
“It needs to be restored right now so taxpayers, when they have to fill out their income tax forms in the coming year, get the full amount,” he said.
“This is tax relief for moms and dads and children,” Quinn said. “It shouldn’t be taken away any year – any year. It belongs to the taxpayers of Illinois, and the politicians ought to get that message now.
“Some rob you with a six-gun, and some rob you by a fountain pen,” he continued. “We got robbed by a fountain pen.”
