By: Ted Dabrowski and John Klingner
Newly-minted Illinois Gov. J.B. Pritzker boxed himself into a corner when he delivered his inaugural address on Monday. He promised to balance the budget, spend billions more on programs and spare Illinois’ middle class from an income tax hike – all while keeping the state’s core spending drivers intact.
What he promised isn’t possible. Even after relying on what he might get from new sources like marijuana and gambling, his promise to hit the wealthy with a progressive tax won’t bring in enough revenues. There simply aren’t enough millionaires in Illinois to do what Pritzker wants.
Since Pritzker has never released a concrete tax plan, Wirepoints calculated what a realistic progressive tax could look like under his spending proposals. We took spending estimates from media reports – they range from $10 billion to $18 billion – and combined it with the Illinois Department of Revenue’s income tax data to derive the tax brackets.
No matter how you run the numbers, the progressive tax rates needed to fund Pritzker’s billions in promised spending would be destructive to Illinois. They’ll punish the wallets of both the middle class and wealthy and push even more residents over the border.
A progressive tax hike on the middle class
The reality is Pritzker can only get all the revenues he wants by hitting middle-income Illinoisans. To achieve his minimum spending targets, Wirepoints’ found that the middle class with incomes of $50,000 and above would have to be hit with higher taxes.
Under the above scenario, an Illinoisan with $75,000 in taxable income will pay nearly $900 more in taxes, up 24 percent compared to the current flat tax of 4.95 percent.
And for two married, career teachers earning a combined $138,000 in taxable income (the average Illinois teacher salary is nearly $71,000 according to COGFA), the progressive scheme would hike their taxes 50 percent, to $10,270 a year, up from their current $6,831 bill.
And an Illinoisan that makes $1 million will see their tax double, growing to $100,000 a year from the $50,000 they currently pay under the flat tax.
Wirepoints also ran tax scenarios that avoided hitting the middle class. We found that if Pritzker’s progressive taxes only raised rates on the “truly” wealthy, then Illinois’ top tax rate would have to reach absurd levels. For full details, read Wirepoints special report: What Pritzker’s progressive tax rates will probably look like.
Focus on reforms, not a progressive tax
Wirepoints’ tax math is actually kind to Pritzker. It doesn’t take in account the reality that many wealthy and middle-income residents will leave Illinois rather than pay far higher taxes.
Illinois outmigration has been on the rise for years. A near-record 114,000 residents left the state in 2018 alone. In all, more than 1.5 million people have left the state since 2000, taking a part of the state’s tax base with them.
Higher taxes will only accelerate the rate at which Illinoisans flee.
The governor is stuck in a corner of his own design – he’s made promises that are impossible to keep.
Pritzker would do far better to focus on “embracing hard choices,” another promise he made in his inaugural speech.
Making hard choices means enacting structural reforms Illinois so desperately needs – including a constitutional amendment for pensions.
That would serve Illinois far better than impossible tax and spend promises.
For full details about the Pritzker’s potential tax hikes and Wirepoints’ progressive tax scenarios, read Wirepoint’s special report: What Pritzker’s progressive tax rates will probably look like.