Big win for tax hikes, big trouble for the middle class

By: John Klingner

On Monday, the Illinois House of Representatives voted to amend the Illinois Constitution by adding progressive income tax language. The amendment passed 73-44-1 on party lines. It will now end up on the ballot next year for all Illinoisans to vote on.

Politico Illinois described the House vote as “Pritzker’s big win.” The better way to describe it is “big trouble” for Illinois’ middle class. But you wouldn’t know that from what tax hike proponents say.

Gov. Pritzker went on record saying: “The commitment is to vote for rates that do in fact protect the middle class and those striving to get there.” House Speaker Madigan echoed Pritzker: “Middle-class families bear too much of the burden under the current tax system, and a ‘fair tax’ will enable us to make the wealthy pay their fair share.”

Their rhetoric about protecting the middle class falls short once you look at the math behind the tax. The reality is Pritzker and Madigan are going to come after middle-income residents. Here’s why:

1. Amendment now, rates later. The vote for/against a constitutional amendment will only determine whether a progressive tax structure is allowed or not. The actual progressive tax rates will come later. Support for the amendment means entrusting politicians with what amounts to a blank check. Illinois politicians don’t deserve that trust.

2. Taxing only the rich won’t work. There’s little incentive for wealthy residents to stay if they get stuck with a 60 percent increase in their income tax rates. The 20,000 Illinoisans who make $1 million-plus currently provide more than 16 percent of the state’s revenues. Only a few of the wealthiest have to leave to wreck Pritzker’s plans.

3. Pritzker’s “Fair Tax” isn’t a real plan. The governor’s low introductory rates raise just $3.4 billion in new revenue, only a fraction of the $10 billion-plus in new spending promises he’s made. It’s much like a cable company offering an “introductory” deal just to rope you in. And remember, Pritzker’s plan does nothing to fix Illinois’ structural problems, which means the state’s fiscal holes will only get bigger.

4. The middle class will be targeted. The governor will eventually need more money to fulfill his spending promises. But there are simply not enough wealthy people for Pritzker to tax. To get the funding he wants, Wirepoints calculated Pritzker will raise taxes on the middle class, starting on incomes of $50,000 and above.

It’s now up to ordinary Illinoisans to stop the progressive tax. Learn why the tax is such a bad idea by reading the pieces below:

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Hansie M
4 years ago

From my vast experience with family and friends who are constantly having financial crises, the root problem is almost never on the revenue side of the ledger. It’s on the expense side. Same for Illinois and the USA.

Freddy
4 years ago

With many really high earners most of their compensation is in stock or stock options which is only taxed when cashed in at a lower rate so someone making $10 mil or more will not be taxed on the entire amount only take home. What about those who take a token $1.00 yearly salary and the corporation pays for most everything they need? The regular high earners doctors /lawyers/business owners can afford attorneys to reduce taxable income by maybe incorporating -being independent contractors or something to that effect. The upper income earners have numerous legal options available to them to… Read more »

Hansie M
4 years ago
Reply to  Freddy

I agree with your point that the middle class will take the hit. The regular high-earners you point out are not the enemy though. The rules of the game are out there for everyone to see. They play by the rules. Therefore, they don’t deserve the criticism. Governments that refuse to live within their means are the real enemy.

Freddy
4 years ago
Reply to  Hansie M

Not meant in any way that they are the enemy. Middle class have the same rules but would be cost prohibitive for most. Just saying they have a way around the taxing problem at a lower percentage cost to total income. Those who can should do so. Lower income pay little if any,high income will try to pay less so the middle will be carry the burden. Maybe those receiving public assistance like food stamps-child care-free or low cost medical-housing allowance and so on should be taxed at least on an unearned income.level. Here in Rockford last year they finished… Read more »

oooBooo
4 years ago
Reply to  Hansie M

Yes, the key is always to distinguish the people who have the political advantages from those who simply earn more money. The political class plays on people’s jealousies to drive their agenda. As such it always best to not concern ourselves with how much other unconnected people earn or pay in taxes but rather point out what the political class and those it serves and those connected to it are up to.

debtsor
4 years ago

These numbers work great until the next recession hits and a few hundred thousand six-figure jobs disappear in industries like finance, credit, housing, insurance and sales. While there are a lot of $100,000 a year government employees, it’s not nearly enough to keep this games of three card monte going. I regular work with individuals who earn $100,000 plus a year. The take home on $100,000 isn’t as great as you think. After health insurance, taxes, 401k contributions, all that is left is around $5-6,000 a month. The earner then pays $2,200-$2,500 for the mortgage (and re taxes will increase),… Read more »

oooBooo
4 years ago
Reply to  debtsor

Taxes for a government employee are an accounting fiction much like the employer contribution to social security. You have to earn that employer contribution because the employer is interested in the net cost to employ you. Makes no difference where that money goes. Neglecting the complication of multiple taxing bodies if the government employee were simply paid the same take home pay tax free it works out to the same figure in the end. So high salary government jobs can’t support the system, they are a drain upon it. It’s a snake eating its own tail. And yes, most people… Read more »

world with end
4 years ago

another chapter in “The Incredible Shrinking State” John, for your point #2, let’s not forget about the earners in the $250K-$1M range who, according to your chart, provide about 17 percent of the tax revenue. Checking your previous chart, their initial tax rate increase would be over 50 percent; so, I think a portion of those residents would be relocating out of state along with the $1M and over earners. Therefore, the loss in tax revenue would be even greater, and IL would lose population at an even greater rate than currently. Also, in the future, as the progressive tax… Read more »

NB-Chicago
4 years ago

And allows for a revenue sources to be taxed multiple times

Brian
4 years ago

Regarding point 2, its important to note that the wealthy residents don’t actually need to leave the state. The just need to leave for 6 months and 1 day and have their primary residence be in another state. I would believe that many wealthy residents in IL have second (or 3rd) homes in places like Florida, Texas, Nevada, Nashville etc… With technology and remote working nowadays, this should not be much of a problem for the wealthy.

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A statewide concern: Illinois’ population decline outpaces neighboring states – Wirepoints on ABC20 Champaign

“We are not in good shape” Wirepoints’ Ted Dabrowski told ABC 20 Champaign during a segment on Illinois’ latest population losses. Illinois was one of just three states to shrink in the 2010-2020 period and has lost another 300,000 people since then. Ted says things need to change. “It’s too expensive to live here, there aren’t enough good jobs and nobody trusts the government anymore. There’s just other places to go where you can be more satisfied.”

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