Union leaders endorse graduated tax amendment; business groups oppose

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(The Center Square) – More than 100 labor organizations in Illinois endorsed a proposed amendment on the November ballot to change the state’s flat-rate income tax structure to a system that has higher rates for those who make more than $250,000 a year, but business groups said it would make it easier for lawmakers to raise taxes.

Proponents have said that the proposal would make the state tax code fairer and provide tax relief to more Illinoisans. Opponents have said it will open the door to future tax hikes that hurt taxpayers and small businesses and would drive more people to leave the state.

Illinois has had a flat rate, which is currently 4.95% for individuals, since the income tax was instituted in 1969. The Illinois Constitution mandates that any income tax be imposed at a single rate for all individual taxpayers, regardless of their income level. Illinois is one of eight states that has a flat rate tax.

Representatives from the UAW, AFL-CIO, the Illinois Federation of Teachers and the Illinois Brotherhood of Electricians held a virtual news conference Thursday to call for the passage of the fair tax amendment in November.

UAW spokesman Bill Hamilton said the income tax amendment would create jobs in the state.

“Dealing with this COVID-19, the fair tax reform would help create new jobs as we move out of this crisis and get Illinois back to work,” Hamilton said. “We can get past this and build a stronger Illinois.”

Todd Maisch, president of the Illinois Chamber of Commerce, said the amendment would make it easier for the legislature to change the tax rates and income levels in the future. He also said the amendment would raise costs for small businesses, which could result in job losses.

“We saw this in Connecticut,” Maisch said. “What started out as a millionaire tax turned out to be a tax increase on people making $50,000 a year.”

Maisch said the revenue that the Pritzker administration has been touting won’t come in because people will pick up and leave the state to avoid higher taxes.

Previous income tax increases have been used to pay off state bills, reduce bond debt and make pension payments. Many state workers are union members. Statewide, about 870,000 employees were union members or had jobs that were governed by a union contract, according to the Bureau of Labor Statistics. Almost half of those union members worked in the public sector.

The 2011 tax increase brought in about $31.6 billion by 2014. That money was used to pay about $3.6 billion in state bills, pay down $8 billion in pension bonds and pay about $21 billion into the state’s five pension systems, which have among the lowest funded ratios in the nation despite the tax increases.

Pritzker, who ran on the idea, estimates a progressive tax would increase revenue by $3 billion a year if it is approved by voters. The budget he enacted and the Democratic supermajority voted for in May relies on more than $1 billion from the tax. Voters decide the fate of the progressive income tax amendment at the ballot box in November.

If voters approve the constitutional amendment, individuals or couples filing jointly would see their rates increasing to 7.75 percent on income over $250,000. The rates would increase to 7.85 percent on individual income of more than $350,000 and joint filing income of more than $500,000. The rates would increase to 7.99 percent on individual income of more than $750,000 and joint filing income of more than $1 million.

If the referendum is approved in November, the new tax rates would go into effect on Jan. 1, 2021.

26-Delivered

via The Center Square

September 3, 2020 at 06:52PM

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