Bill to Make Illinois State Income Tax ‘Progressive’ Filed in Legislature

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Changing Illinois’ flat income tax rates to ‘progressive’ rates where the rich pay a higher percentage of income cannot be done without amending the state Constitution, but a bill drafted by a Chicago Democrat reveals why making that change may be a hard sell.

A legislator from Chicago has filed a bill which would switch Illinois from the current 4.95% income tax rate to a so-called ‘progressive’ income tax system in which everyone who earned more than $7500 a year would pay more in state taxes.

House bill HB3522 would create four tax brackets in which taxes rise as annual income increases.  The non-partisan but conservative leaning ‘Illinois Policy Institute’ has created a tax calculator using the bill’s formulas which you can use to see how your individual state income taxes would be impacted.

Other bills proposing a progressive income tax in the past have been floated in the legislature, but this one is notable in that it increases income taxes even for low-to-middle class wage earners.  A worker making $30,000 per year would pay $167 more per year.  A worker making $50,000 would pay $431 more per year.

The language of the bill makes clear why its sponsor believes higher taxes are needed, and that’s that years of fiscal mis-management have left the state in a dire financial situation. 

The unfunded liability in pension plans, outstanding debt, and the growing backlog of unpaid bills together totals $232,000,000,000 of total outstanding debt. The State can no longer put off addressing its pension debt, and it should not make further cuts to human services. The State must invest more into the education of its children. The problems start and end with the State’s dire finances, and as such, the only path forward must begin with a restructuring of the way the State raises and expends revenue.

This comes just a year after the state rose income taxes from 3.75% to 4.95%.

By increasing funding to schools, one of the bill’s aims is that school districts in turn would reduce property tax rates, which are among the highest in the nation.

The bill has no chance of becoming law, and would be declared unconstitutional even if passed, but could be used to fuel a debate between many Democratic candidates for Governor who favor the idea of a progressive income tax, including front-runners J.B. Pritzker and Dan Biss, versus current Gov. Bruce Rauner (R-IL) who supports reducing state income tax rates.

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