Illinois Governor's Wealth Tax Plan Has 7.95% Top Rate

Gov. J.B. Pritzker took the first step Thursday in fulfilling his touchstone campaign pledge of making the wealthy pay more in income taxes as the billionaire proposed a graduated income-tax structure that would top out at 7.95 percent and he said would generate $3.4 billion in new revenue for the financially beleaguered state.

The Democrat, finishing his seventh week in office, suggested Illinois dump its 50-year-old flat-tax, now set at 4.95 percent, and join 35 other states with scaled-up rates for higher incomes. It would start at 4.75 percent for incomes up to $10,000 and levy the top rate on incomes of $1 million or more.

Taxpayers earning $100,000 to $250,000 would pay the current flat rate of 4.95 percent. But Pritzker claims anyone making $250,000 or less — 97.3 percent of taxpayers — would pay less in income taxes because the rates are marginal, meaning the rates even for different levels would vary; those at the bottom of the bracket would pay a lower rate than those at the other end of the same bracket.

He planned to discuss the issue in more detail at a Thursday afternoon news conference in the state Capitol.

Opposition came swiftly.

“The House Republican Caucus stands united in opposition to a $3.4 billion tax increase on Illinois families and businesses,” said GOP Leader Jim Durkin of Western Springs.

According to the National Conference of State Legislatures , all but six of the 41 states with broad-based income taxes use a graduated rate structure. Other than Illinois, states with a single, flat tax rate on all income are Colorado, Indiana, Michigan, Pennsylvania and Utah.

The flat-rate system was written into Illinois’ 1971 Constitution. A change would require a constitutional amendment approved by 3/5th majorities in the General Assembly and ultimately by voters — at the earliest, at the November 2020 election.

Senate President John Cullerton, a Chicago Democrat, called the forthcoming “comprehensive, bipartisan” discussion “long overdue.”

“For years people have been saying Illinois should be more like our neighboring states with more modern and fairer tax systems,” Cullerton spokesman John Patterson said. Steve Brown, spokesman for Democratic House Speaker Michael Madigan of Chicago, noted that Madigan supports the idea.

Pritzker campaigned on the progressive tax not only as a way to force the rich to carry a heavier tax load, but as a way to boost revenue. The state faces a deficit of more than $3 billion at the end of the fiscal year that ends in June 2020. The state still has $15 billion in debt associated with unpaid bills and has paid $1.25 billion in late-payment penalties.

He said options to a graduated tax plan would be to cut state spending on education, public safety and social services by 15 percent, or raise the current flat tax to 5.95 percent, “meaning every family in the state would pay higher taxes.”