With 2017 just around the corner and state policymakers beginning work on next year’s legislation in earnest, it’s worth pausing to review recent trends in state taxation to glean hints of what to expect in the year to...
- The Tax Policy Blog
- Illinois Speaker Madigan Proposes 3 Percent High-Earner Tax
Illinois Speaker Madigan Proposes 3 Percent High-Earner Tax
On Thursday, Illinois House Speaker Michael Madigan proposed a 3 percent “additional income tax” constitutional amendment for earners with incomes over $1 million. Currently, Illinois’ income tax rate is 5 percent for all income levels, and, according to current law, it is scheduled to fall to 3.75 percent on January 1, 2015.
Illinois has been debating progressive income tax proposals for some time now, with previous proposals including top rates ranging from 9 percent to 11 percent. Illinois’ current flat tax is protected by the state’s constitution, and thus a move to a progressive tax would require a supermajority of the legislature and a referendum in November. The tax increase would be retroactive to January 1, 2014.
Madigan’s plan differs from others in that it ties a rate proposal to the progressive tax constitutional amendment and dedicates the revenues to public services. Other tax increase proposals in Illinois have not tied the constitutional amendment’s passage to a specific rate structure: they’ve proposed amendments giving broad powers to Illinois policymakers to make a progressive income tax at their discretion, and left rate structures vague. Madigan’s proposal specifically sets a 3 percent additional rate above the normal income tax rate and ties revenue raised from the tax to school districts to be distributed on a per pupil basis.
With numerous tax plans floated for Illinois, it’s not clear what the final plans put before voters may be. Governor Quinn will deliver his budget address on March 26th, where presumably his tax plan will be laid out. But whatever the case, a “millionaires’ tax” is poor policy: it is a narrow, high-rate tax on a highly mobile group of people who earn less in bad economic times. The spending such a tax increase supports leads to the cost of government being hidden from most people and shouldered by a few, making revenues even more volatile and narrowly-based.
It’s true that high-earner taxes will can raise revenue in the short term, but eventually, the taxes can negatively impact location decisions. Illinois is already struggling to keep many of its prominent companies and experiencing slower than average job growth. With a higher tax on individuals and many businesses, people expanding old businesses or creating new ones will incorporate the higher cost of doing business into their decision-making, and could choose to steer clear of the state.
Read more on Illinois here.
Read more on high-earner taxes here.
Follow Lyman on Twitter.
Get Email Updates from the Tax Foundation
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.
Recent Blog Posts
Related State Articles
- Lunch Links: Not So Sweet Soda Taxes Have Multi-City Appeal; Trump Includes Tax Reform in Efforts to Keep Carrier from Bolting; Christie Cites 'Blood Money' Tax Revenue in Shunning Marijuana Legalization for N.J.
- Vigilance and Nimbleness Are Crucial in 2017
- Lunch Links: IRS Regs Could Change in Trump Administration; New Jersey's Bond Rating Lowered Again; Illinois Shortfall Worse Than Expected; Politico Forum Upcoming on Tax Reform
- 1 of 66
- next ›