Illinois Millionaire Tax Appears Stalled

April 11, 2014

With two Illinois House Democrats having announced their opposition to House Speaker Michael Madigan’s (D) “millionaire tax” proposal, it doesn’t look like it will reach the 71 vote threshold to get on the ballot. With that, news outlets are proclaiming the proposal essentially defeated. Madigan placed the blame squarely on Republicans, with his spokesmen saying Republicans “prefer and protect millionaires over school children.” Republicans have responded by noting that the bill failed due to lack of support among Democrats, who had sufficient members to get an amendment on the ballot if they were united.

If it had passed, Madigan’s “millionaires tax” or, as it was called in the amendment proposal, the “tax for education,” would have enshrined a specific tax rate and bracket structure in the Illinois constitution, and earmarked the funds directly for school districts on a per pupil basis. This plan had numerous problems, as I have written before. It failed to include inflation indexing, didn’t clearly define income, locked Illinois into a very specific tax policy effectively forever with high barriers to change, and would have impacted a large amount of business income, significantly worsening the state’s business tax climate.

The Illinois legislature has until May 5 to pass amendment proposals to be placed on the ballot. Thus, while Madigan’s plan appears out of the running for now, it could theoretically come up again in the next month. The same is true of various progressive income tax plans which, thus far, have failed to gain sufficient legislative traction to get on the ballot.

Meanwhile, even if no structural changes make it on the ballot, the next round in the Illinois tax policy debate will revolve around the “temporary” tax hike to 5 percent on individual income. Illinois’ individual income tax rate is scheduled to reduce to 3.75 percent on January 1, which poses budgetary problems for policymakers facing difficult spending choices. Governor Quinn (D) has indicated his support for making the 5 percent rate permanent, but the legislative fate of the proposal remains to be seen.

See a comparison of all the major Illinois tax plans here.

Read more on Illinois here.

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