The Players: A Graduated Tax Policy's Political Calculations

Apr 18, 2016

Credit Illinois Department of Revenue

Gov. Bruce Rauner says he isn't a billionaire, but he's not far off. Me? I'm Amanda Vinicky, statehouse bureau chief for Illinois Public Radio, and let's just say I've got a better chance of walking on the moon than ever making a billion bucks.

But both Rauner and I -- as does everyone else who lives in Illinois, no matter how rich or poor -- pay the same state income tax rate. The constitution requires a flat tax.

Some Illinois Democrats are moving to change that. 

Rep. Christian Mitchell -- a Democrat from Chicago -- is sponsor of a constitutional amendment that would allow for a graduated tax rate. One based on income levels. Like how the federal government does it.

It's a pretty basic change, albeit with potentially huge consequences for Illinois families, businesses, and the state's bank account.

That's where another Democrat -- Rep. Lou Lang of Skokie -- comes in.

He's filed legislation that gets into the specifics. It creates four different tiers of income, and the rates they'd be taxed at should a progressive structure become legal in Illinois.

It's been attempted before, but Lang says lawmakers got too greedy; they wanted to make too much revenue. He says this time is different.

"The important part of this is not to raise money. The important part of this is that people down here have been clamoring for tax relief for some time. And this is a proposal that will not only raise new money for the state of Illinois, but will provide tax relief in the form of income tax relief to 99 percent of Illinois' citizens," he said. "The levels are very carefully put together. There are some that didn't want to do this, there are some that just wanted more revenue and more revenue. That's why these bills have failed over the years. Our goal here was to provide tax relief, but also to provide some new revenues, so that we can take care of our social services and balance our budget. I think we have a reasonable chance to pass this. Frankly, I can't imagine even anti-tax legislators complaining."

Again, Lang's measure is contingent on the constitutional amendment getting through the legislature, on the general election ballot, and getting voters' approval.

He says he believes in a progressive tax because "those who are more well off need to be more helpful to the state of Illinois ... the flat tax has been hurting our state," he said, before again repeating the claim that 99 percent of filers would see a tax cut.

If you're wondering what this mean for you: here goes. Like I said, Lang's plan is four-tiered. The lowest rate is 3.5 percent. That'd apply to single people who make up to $100,000 and families (joint-filers) with incomes up to $200,000.

The next level is 3.75 percent (the same as it is now) and that's what single folks making up to $500,000 or head of household filers with incomes up to $750,000.

The next level is 8.75 percent. Finally, top earners -- millionaires, really -- would pay 9.75 percent.

Of course, there are factors: like how big a family is, and all that. But a few examples, provided by Lang and Voices for Illinois Children's Fiscal Policy Center:

  • A married couple with two kids and an income of $250,000 would see a tax cut of $500.
  • The tax bill for a family that size with an income of $55,000 would decrease by $116.
  • Then again, a married couple, with no kids and an income of a million dollars, would see their taxes increase by $11,785.

Lang says he estimates it will bring in $1.9 billion dollars to the state. He says action on the concept could be taken soon, because a deadline is looming.

I think we'll see over the next week or so movement on Rep. Mitchell's constitutional amendment," he said. "Any constitutional amendment on the ballot for this November has to pass with three-fifths in both chambers by May 6. So not that far away."

The governor doesn't get to use his veto pen on these resolutions; save for a citizen-driven ballot initiative, just the General Assembly has the power bring such questions to the ballot.

Still, Gov. Bruce Rauner has a lot of influence over Republican legislators and how they vote, and he isn't a fan.

Rauner's spokeswoman Catherine Kelly says "the majority party's desire to skyrocket taxes is breathtaking. A progressive income tax would be the straw that breaks the Illinois economy's back - sending our state even further into the economic doldrums. It's beyond time for Democrats to come to the table and work with the governor to find common ground on real structural reforms that will get our economy moving in the right direction."

Democrats do have super majorities, in both the Illinois House and Senate. I asked Lang if this would be a time for them to link elbows, vote in sync, and use their healthy ranks.

"It would be best if issues like taxation, tax reform, whether it's tax increases or tax cuts, be done in a bipartisan way. And so I'm going to be working for that bipartisan relationship," Lang said. "If the governor wished not to be helpful that would be his choice. Seems to me, though, that it's very difficult to look at a proposal that's going to provide tax relief to 99 percent of our taxpayers and say 'I'm against that.' How can anybody be against that?"

They can be, and they are.

Though Lang makes it sound impossible for a politician to oppose -- and again, that's probably part of the political calculus in how the rates are set -- critics were quick to make their thoughts known.

Not just Gov. Rauner.

Small businesses (think sole proprietorships, or S-corporations) often pay personal income taxes, not the corporate rate.

Director of the Illinois Chamber of Commerce Todd Maisch says the "plan would punish small business owners and would accelerate the documented flight of high net worth individuals out of our state." 

Maisch says it won't make Illinois the $1.9 billion Lang has promised; he says it'll generate millions for neighboring states, where wealthy people and small businesses will flee.

The group Americans for Prosperity is calling Lang's plan "election year politics."

The AFP's state director - David From - says given low levels of confidence in government, "Illinoisans should not trust the General Assembly enough to give them carte blanche ability to add brackets."

Speaking of income taxes, I hope your got those returns in on time! Unless you filed for a six month extension, they're due April 18.