By: Ted Dabrowski and John Klingner

News-Gazette columnist Jim Dey was right: Illinois House Speaker Mike Madigan made a mistake recently when he said he was “ready to work…to enact a fair tax plan like those…in Iowa, Kentucky, Missouri and Indiana.

Somebody should have told Madigan that if he wants to be “…cutting taxes on the middle class, putting more money in the pockets of working families,” then the last thing he should propose is copying our neighbors’ progressive tax schemes.

Adopting many of their tax plans in Illinois would actually punish middle-income workers and working families. That’s the case whether you’re an individual earning $55,000 or two married mid-career teachers.

Progressive tax proponents like to trumpet tax structures of Illinois neighbors as if they’re panacea for middle-income workers. But Illinois’ neighbors have progressive tax rates that actually hit those workers harder than Illinois currently does.

Take Missouri, for example, which has 10 different income tax brackets. Its highest marginal tax bracket of 5.9 percent is on all income greater than $9,072. No, that’s not a typo. All income greater than $9,072 is taxed at 5.9 percent.

They might as well just call it a flat tax at 5.9 percent.

Or Iowa. That state taxes all marginal income between $14,382 and $23,970 at rate of 6.12 percent. The tax rates only go up from there.

Wisconsin’s brackets are even more unforgiving. The state taxes all marginal income between $22,470 and $247,350 at a rate of 6.27 percent, far higher than Illinois’ own flat rate.

Even the blue-state “model” Minnesota taxes the middle class far more than Illinois. The state’s starting tax bracket goes from $0 to $25,890 with a rate of 5.35 percent.

A overall look at Illinois’ neighboring tax rates shows their progressive schemes have little to do with taxing the rich – although they do that, too.

Instead, it shows that for progressive tax proponents to raise the revenues necessary to fund their spending plans, they need to push high tax rates down into ever lower-income brackets. It’s the case in every single tax scheme of Illinois’ neighbors.

To be fair, just looking at the published income tax rates doesn’t tell the whole story. Every state has exemptions and other deductions that reduces the overall tax rate – the “effective tax rate” – a resident pays.

Unfortunately for progressive tax proponents, even when effective tax rates are measured, Illinois’ neighbors still tax middle income workers more. That’s broadly the case for residents who make more than $55,000 a year.

For example, an individual worker in Illinois with a gross income of $55,000 will be taxed at an effective tax rate of 4.8 percent. That assumes Illinois’ standard personal exemption is applied.

Graphic amended 9/24/18. See note at end of piece.

The “fair tax” states of Minnesota, Wisconsin and Kentucky all hit that same middle-income worker harder than Illinois does, even after their own standard exemptions and deductions are applied.

Or consider the taxes on one of the 30,000 mid-career teachers in Illinois making between $60,000 and $80,000 a year.

An individual teacher making $70,000 will be taxed at an effective tax rate of 4.8 percent in Illinois. Wisconsin, Iowa, Kentucky and Minnesota all impose burdens higher than that, most above 5 percent.

Wisconsin’s progressive scheme taxes the most. It imposes a tax burden that’s 13 percent bigger compared to Illinois.

Graphic amended 9/24/18. See note at end of piece.

The story is much the same for married teachers in Illinois filing jointly. The “fair” progressive tax states hit them far harder than Illinois and its flat tax does.

Graphic amended 9/24/18. See note at end of piece.

Illinois would hit that couple harder if it switched to Minnesota, Kentucky, Iowa, or Wisconsin’s tax structure. And the higher income tax would come on on top of the nation’s highest property taxes Illinoisans already pay.

Forget the progressive tax

Madigan accidentally included Indiana among the states he said has a “fair tax plan.”

Funny enough, he’s right. But not in the way he intended. Indiana actually has a flat tax rate of just 3.23 percent – it’s clearly more fair to middle income earners than any of its progressive tax neighbors.

Illinoisans better watch out. They already pay the highest property taxes in the nation and some of the country’s highest combined state and local taxes.

Progressive tax proponents only want more, no matter what they say.

You only have to look next door to see to see what a progressive tax scheme really looks like.

Note on amended graphics: Wirepoints changed its state-to-state income tax comparison to FY 2017 from FY 2018 because 2017 provides a more appropriate like-for-like comparison between tax structures because: (1) Changes are still being made to 2018 state-level tax exemptions and deductions due to the TJCA and its changes to federal tax law; (2) Kentucky moved to a flat income tax in 2018; using 2017 allows for a comparison to KY’s previous progressive tax structure.

 

Read more from Wirepoints about lawmakers’ attempts to impose a progressive tax:

Another dishonest article supporting progressive income tax

Don’t count on a progressive income tax to save Illinois

Sham panacea of progressive income tax starts getting exposed

Rising property taxes and stagnant incomes: A lethal combination for Illinoisans

Simple math shows absurdity of Illinois’ progressive tax cure

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JWB
1 year ago

A nearly 9 percent state income tax over $75,000 in Iowa? Wow. Government is simply too big, too expensive at every level.

world with end
1 year ago

So, they can revise the State Constitution to raise tax rates but not change the pension wording that allows bloated pensions. Unconscionable!

nixit
1 year ago

With all the talk of a possible progressive (higher) state income tax structure, no one is talking about a corresponding reduction in property taxes. If our high property taxes are the results of a “low” flat income tax, then we should see significant reductions in local taxes under a progressive plan. This is probably why the CTBA progressive tax plan limits the tax hikes to earnings over $300,000. Martire knows there will be no property tax relief with a graduated tax plan, so limiting the increased rates to the “wealthy” keeps the pressure off the local school districts to make… Read more »

Mark M
1 year ago
Reply to  nixit

My understanding is that municipalities actually have little control over many of their expenses, including pensions, as the state mandates govern and control. And save for park district fees or parking tickets, municipalities only reliable material source of revenue is property taxes. So as been said here many times before, unless significant reform occurs, which won’t happen with the current class of political actors, property taxes will increase irrespective of income tax increases. So if Pritzker is elected, what happens? Income taxes will go up, but so will property taxes. And the tax increases will not impact the deficit each… Read more »