Reeder: Beware of ‘progressive’ income tax for Illinois
By Scott Reeder email@example.com February 5, 2014 9:28PM
Updated: March 7, 2014 12:25PM
Hang on to your pocketbooks, the politicians are getting restless.
They want more of your money.
Never mind that the Illinois Legislature jacked up your state income tax with a temporary increase from 3 percent to 5 percent three years ago. At least the bulk of this tax increase is set to expire in January.
Now the politicians are looking at another tax grab, and this time they’re doing it under the guise of “fairness.”
Public employee unions and their political allies are pushing hard for a graduated, or “progressive,” income tax.
What this would mean is that instead of everyone paying the same percentage of his income to the state, the percentage would get higher as a person earns more money.
But supporters of this idea face a big obstacle — the Illinois Constitution, which mandates that the state use a flat tax, in which all taxpayers pay the same rate.
So there’s a push now to have the Legislature put a referendum measure on the November ballot on whether Illinois should switch to a progressive income tax.
You’ll hear some malarkey about this being about “fairness.” Don’t believe it. It’s about money, plain and simple.
Our deadbeat state is looking for ways to collect more, but the politicians can’t just come out and say that so they’re using code words such as “equitable” or “fair.”
The fact of the matter is, Illinois already has a progressive income tax.
Don’t believe me? Well, consider these numbers:
A household earning $15,000 in Illinois pays on average 1.9 percent of its income to the state.
A family earning $30,000 pays 2.9 percent.
A taxpayer earning $75,000 pays 3.8 percent.
What’s happening here is something called the “earned income tax credit.”
We could get into a long discourse on whether it is good public policy or not. I have my reservations.
Regardless, Illinois now has a means to give tax breaks to low-income people and has been employing it quite aggressively for many years.
So this progressive income tax isn’t about giving relief to poor people — it’s about making middle-class and upper-income people pay more.
In January, the state income tax rate is slated to drop to 3.75 percent from its current temporary level of 5 percent.
But under a proposal by state Rep. Naomi Jakobsson, D-Champaign, every Illinois family earning $18,000 or more would pay a top rate of 4 percent or more.
I’ve never considered a household making $18,000 per year to be rich. But under Jakobsson’s plan, those families would pay a higher rate next year than they otherwise would.
Of course, the earned income tax credit would apply for some of these folks, but that’s still a pretty low income level to start imposing a higher tax rate.
Also, her plan calls for every family earning more than $58,000 to pay a top rate of 6 percent, which is a higher top rate than the current top rate. And the rates keep ratcheting up from there to a full 9 percent.
In fairness, that’s just one of the proposals involving a progressive income tax. We really don’t know where the Legislature would set the rates — and if the voters will give them permission by amending the state Constitution.
But if other states are any guide, a progressive income tax means a greater burden for middle-class families. Missouri imposes its highest rate on families earning more than $9,000. Iowa kicks in its highest rate for families making at least $67,230. Kentucky’s top rate applies to families earning $75,000 or more.
We aren’t talking about Rockefellers or Vanderbilts here.
A progressive tax isn’t about tax relief for the poor — we already do that through the earned income tax credit.
It’s about collecting more money from more people, like you and me.
Scott Reeder is a veteran statehouse reporter and the journalist-in-residence at the Illinois Policy Institute, a nonprofit research group that supports the free market and limited government.