Millionaires Would Pay 3 Percent More Under Pritzker Tax Plan
Want to know what you would be paying under Gov. J.B. Pritzker’s graduated income tax proposal? The governor released the specifics of his plan Thursday, and, as advertised, it would hit high earners the hardest.
Illinoisans who earn $1,000,000 and up will have to get used to paying 3 percent more of their income in state income taxes under the governor’s just-released proposal – though Pritzker cautions this is his opening plan and negotiations are underway with the General Assembly for a final plan. The current rate is a flat 4.95 percent for everyone, so 97 percent of earners, according to the governor, would actually see a slight cut in their state income taxes.
The governor’s proposed tax rates are as follows:
• 4.75 percent for those making $0-10,000 in income
• 4.90 percent for those making $10,001-$100,000
• 4.95 percent for those making $100,001-$250,000
• 7.75 percent for those making $250,001-$500,000
• 7.85 percent for those making $500,001-$1,000,000
• 7.95 percent for those making over $1,000,000
In addition, the corporate rate would rise from 7 to 7.95 percent.
Pritzker is expecting the state to take in $3.4 billion in additional revenue through this system and says it will provide a climate of stability for skittish business owners.
“The most important thing we are accomplishing is stabilizing the finances of the state,” Pritzker said. “We cannot go longer in the state with a budget situation that doesn’t actually pay the bills, that doesn’t pay down the backlog, that doesn’t approach paying off the pension liability. The question is, are you going to do it in a way that’s fair to working families? Or in a way that reduces the burden on working families and asks those who are most able to step up to the plate and pay? That’s what this system does.”
Pritzker is also proposing a 20-percent increase in the property tax credit and $100 per child tax credit.
Not surprisingly, the plan was met with scorn from conservative groups and praise from progressive groups. Republicans say it will further exacerbate outmigration of people and businesses from the state.
“More tax hikes will not solve Illinois’ fiscal problems,” said Illinois GOP chairman Tim Schneider.
Liberal-leaning groups say this is the fairest way to generate more revenue for the state’s needs.
“This fair tax proposal, which provides relief for more than 97 percent of taxpayers, will be a welcome change for our members and the communities we serve,” said Illinois Federation of Teachers President Dan Montgomery.
The General Assembly will have to pass the final plan as a referendum and it will go on the 2020 ballot. A supermajority of voters will have to approve changing the state’s constitution to allow a graduated income tax.
The libertarian think tank, the Illinois Policy Institute, says it fears that future taxes could go up more.
“Once you open up the constitution to the possibility of a progressive income tax, you’re essentially giving politicians a blank check to raise income taxes on a groups of people one at a time,” said Adam Schuster, the institute’s budget and tax policy research director.
The new plan would add Illinois to the majority of states that have an income tax. Currently, 34 of 41 states have a graduated tax. Ralph Martire of the Center for Tax and Budget Accountability says Illinois’ proposed rates would compare pretty favorably to neighboring states.
“If you look at Iowa, they have a top rate of 8.9 percent, but it kicks in at a much lower rate of income,” Martire said. “Same with Minnesota, which has the highest rate in the Midwest, 9.85 percent, and that kicks in at $266,000 of income for a married couple filing jointly.”
The soonest the tax could take effect would be very late in 2020 if voters approve the ballot measure. Pritzker has proposed short-term fixes in the interim, like a plastic bag tax, health insurance tax and revenue from marijuana and gambling.
Follow Paris Schutz on Twitter: @paschutz
Note: This story will be updated with video.