The start of a conversation is underway in Illinois about what the future of our tax system ought to be.
This conversation hasn’t quite risen to the level of widespread debate just yet, but soon enough it will be the talk of the state. Certainly the governor’s race that will get going this summer will focus on this topic.
As it stands, the temporary income tax increase that has individual taxpayers paying 5 percent of their income in state taxes is set to expire in 2015, just as the next governor is getting ready to start her or his term in office.
If nothing happened between now and then, the individual tax rate would drop back to 3.75 percent in 2015. But some legislators, interest groups and activists say it’s time to change the state constitution to allow for the possibility of progressive or graduated income taxes in Illinois. They are backing a constitutional change that would be put to voters on the November 2014 ballot.
They argue the rate you pay should depend upon your income level.
If you make more income, you pay a higher tax rate. At least that is how it works in the 34 states that have such a system. And if you make less income, you pay a lower tax rate.
We’ve fostered this debate about the tax system in Illinois, featuring guest essays from both sides of the conversation last fall and again last week. We will continue to be a home for this conversation as it grows and intensifies in the months ahead. We also already have published a thorough look at what system is in place around the country in our infographic here.
It’s interesting to note that there are seven states with no income tax, and that Illinois is one of nine states with a flat-rate income tax. That is, all citizens pay the same individual rate. Of course, those who make more income do pay a higher tax because five percent of $100,000 is more than five percent of $10,000.
And therein lies the rub: We just pulled those figures and rates out of thin air to demonstrate our point. But that shouldn’t be good enough for such an important question for the future of Illinois and its citizens.
No one should be asked to decide whether we have a flat tax or a progressive tax system without knowing what advocates of each aim to precisely propose to impose on all of us.
Plainly put: We need to know what all the tax rates would be, and on what ranges of income, before any of us should be expected to begin to entertain the notion of voting on this tax system change.
Are proponents of a progressive tax thinking Illinois needs to be like Alabama where incomes below $500 are taxed 2 percent and those above $6,000 pay 3 percent? Or are they thinking we need to be like Hawaii where incomes up to $2,400 are taxed at a rate of 1.4 percent and those with incomes over $200,000 pay 11 percent of their income to the state?
That’s quite a range of possibilities, isn’t it?
And that’s also before we even get into the nitty gritty of how our tax money is being spent, what it’s being spent on and the cold, hard truth that even with more tax revenue than ever before, Illinois has the worst debt in the nation.
We’re all paying 5 percent now and the state is collecting $7 billion more from all of us and we’re still not making much of a dent in the backlog of unpaid bills or in our pension liabilities.
The conversation about our tax structure cannot occur in a vacuum filled with vagaries about what might or might not be fairer or better. Voters deserve more than that. Illinoisans deserve specifics.
What rate will be paid by what income ranges if this change were to occur? And those who back a flat tax also need to weigh in. Will they work to keep the rate at the current 5 percent? Let it drop back down to 3.75 percent? Or raise it beyond 5 percent?
We deserve to know the specific answers. From everyone leading one perspective or the other. And we, the people, must demand the specific answers.
None of us should be willing to sign a blank check over to any of our elected officials.
“New ‘fair tax’ resolutions, same old questions,” Reboot Illinois editorial, June 2013
“Flat income tax? Progressive tax? No state income tax? A nationwide overview,” Reboot Illinois infographic
“Illinois’ flat tax system: Outdated, unfair,” Ralph Martire, Center for Tax and Budget Accountability, December 2012
“Progressive tax is code for ‘tax increase,“ John Tillman, Illinois Policy Institute
“Amendment sponsor: Progressive tax is fair tax,” State Rep. Naomi Jakobsson, D-Urbana
“Progressive tax punishes business for success,” David From, Americans for Prosperity
“Supporters of progressive tax have a long road ahead,” blog post, Reboot Illinois editor Matt Dietrich, March 2013