Cross-posted from Blue Downstate
Since 1970, the State of Illinois has been required, by the Illinois Constitution, to levy either a flat income tax, in which all Illinois taxpayers are taxed at the same rate, or no income tax at all.
Today, our state’s flat income tax is badly outdated, and it’s time that the Illinois Constitution be amended to allow the state to levy a progressive state income tax.
Nearly a year ago, the State Budget Crisis Task Force, led by former Federal Reserve Chairman Paul Volcker and former Democratic New York Lieutenant Governor Richard Ravitch, called for Illinois to implement a progressive income tax:
A new report on Illinois’ finances by the State Budget Crisis Task Force includes a few predictable findings — the public pension system is underfunded, the Medicaid gap is growing — but it also attacks the state’s income tax system, calling it out of step with the economic realities of the 21st Century.
When Illinois wrote a flat tax into its 1970 Constitution, the United States was a much more middle-class country. Income inequality was at a historic low, especially in industrial states with heavy manufacturing bases and large union membership. That, of course, has changed in the last 42 years. Chicago has lost all its steel mills, for one thing. [...] The income of the average American has remained constant, while the income of the top 1 percent of Americans has tripled. But because Illinois has a flat tax, we can’t capture as much of those gains as we could if we were able to increase rates on high earners.
Illinois’s state income tax rate is currently 5% for all income levels. As a result, any legislation that would either raise or lower the state income tax in Illinois without amending the state constitution would affect Illinoisans of all economic classes. Given how much of a mess our state’s finances are in, lowering the state income tax rate, or eliminating the state income tax altogether, would be absolutely nonsensical (despite the fact that Illinois Republicans, like their counterparts in other states, want to cut taxes), however, raising the state income tax rate would be politically risky for state legislators to support.
However, amending the Illinois Constitution to allow for a progressive income tax would allow the State of Illinois to not only raise income taxes on the wealthiest Illinoisans, but also lower income taxes on poor and middle-class Illinoisans. A progressive state income tax, in which the wealthiest Illinoisans would pay a higher percentage of their income in taxes than poor and middle-class Illinoisans, would help alleviate some of this state’s fiscal problems, although it’s probably not going to fix the state’s fiscal mess completely.
The way that our state levies income taxes is badly outdated. That’s why I’m asking for the General Assembly to put an proposed amendment to the Illinois Constitution on the ballot that would allow for the State of Illinois to levy a progressive state income tax.
Related articles
New State Coalition Calls For ‘A Better Illinois’ (progressillinois.com)
Some lawmakers pushing for ‘progressive’ Illinois income tax (stltoday.com)
State needs a progressive income tax (pantagraph.com)