Eye On Illinois: New tax ideas just rumblings before hearing budget speech

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Three weeks from today, Gov. JB Pritzker will deliver his budget and state of the state speech.

During his Jan. 9 inaugural address, Pritzker never said the words “income tax.” It seems unlikely he’ll omit that phrase from Feb. 15 speech, but context is crucial.

State Sen. Robert Martwick, D-Chicago, has suggested taking another run at changing the flat tax system after voters soundly rejected Pritzker’s first such effort in 2020. State Rep. Will Guzzardi, D-Chicago, told WTTW-TV his colleagues should consider a wealth tax, which would apply to people with assets exceeding $1 billion.

Scott T. Holland

Scott T. Holland

Martwick is looking at pension debt and the annual business of running a state, like schools, but is fuzzy on details beyond being different from the 2020 discussion. Guzzardi said his proposal could generated $200 million to $500 million per year and would direct that money to a fund for to fully fund schools and universal child care and attempt to end homelessness.

Pritzker hasn’t endorsed either proposal and focused his inaugural on other priorities, though it’s worth remembering government priorities always come with price tags.

It’s an entirely different story across the Cheddar Curtain, where The Associated Press last week reported about Republicans’ efforts to shift away from Wisconsin’s graduated income tax schedule toward a flat rate of 3.25% for all residents. The push is tied to a state surplus approaching $7 billion. According to the AP’s Scott Bauer, Republicans and Democrats both want to lower Badger Staters’ tax burden, but Democratic Gov. Tony Evers vowed to block GOP Senate Majority Leader Devin LeMahieu’s plan.

Wisconsin uses four brackets: the lowest is 3.54% for incomes up to $12,760. The highest rate is 7.65%, applicable to individual incomes exceeding $280,950. Last year the state collected roughly $9.2 billion in income taxes.

Drawing Illinois comparisons is a bit complicated because of filing deadline adjustments instituted as COVID-19 mitigation efforts, but the fiscal 2023 budget summary shows $26.4 billion in personal income tax revenues (net of refunds) in fiscal 2022 with another $5.8 billion in corporate incomes tax. You have to go all the way back to fiscal 2010 to find a number smaller than Wisconsin’s 2022 take, and back then Illinois’ personal rate was 3% with a 4.8% corporate rate.

Illinois’ financial outlook has unarguably improved under Pritzker since 2019, but that comes at a cost and there’s still significant room for improvement. Hardly anyone feels undertaxed. Politically, the only way to feasibly enact a major structural change is connecting it to an obvious spending need, such as the Department of Children and Family Services, which still would be an uphill battle.

The budget speech will speak volumes about Pritzker’s goals, at home and abroad, and definitely warrants scrutiny.

• Scott T. Holland writes about state government issues for Shaw Media. Follow him on Twitter @sth749. He can be reached at sholland@shawmedia.com.

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January 25, 2023 at 05:20AM

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