New Proposed State Income Tax Rates Unveiled By Gov. JB Pritzker

SPRINGFIELD, IL — Gov. JB Pritzker revealed new tax rates for his proposed graduated state income tax structure for the first time Thursday.

The billionaire Democrat campaigned for office with the promise of pushing for a progressive income tax to make the wealthy pay more, arguing a major income tax overhaul was essential to fixing the state's fiscal woes.

"People like me should pay more, and people like you should pay less," Pritzker said at a press conference in Springfield.

The changes proposed by the governor would generate an additional $3.4 billion in revenue for the state, while the 97.3 percent of taxpayers with annual incomes below $250,000 will pay less in taxes, according to his "fair income tax" plan. Pritzker said the plan would balance future budgets and reduce the state's pension liability.

The current state income tax rate is 4.95 percent, with a constitutional requirement that it remains flat. (A six-bracket graduated income tax passed in 1932 but was struck down by the Illinois Supreme Court as unconstitutional in Bachrach vs. Nelson.) As a result, Pritzker's plan would need to be approved by voters in a referendum that could come as soon as November 2020. The language of that referendum will be determined by lawmakers. Pritzker's office has not yet released a proposed ballot question.

That rate would stay the same for taxpayers with incomes between $100,001 and $250,000. The 86.1 percent of taxpayers with incomes up to $100,000 would see slight declines in marginal rates — 4.75 percent on the first $10,000 and 4.90 percent on the next $90,000.

For the 0.3 percent of Illinois households that reported more than $1 million in income, the rate would no longer be marginal. All income would be taxed at a rate of 7.95 percent. Additionally, the state corporate tax rate would rise from 7 percent to 7.95 percent.

"There are those who want to scare people by claiming that this proposal will cause residents and businesses to flee Illinois. They couldn’t be more wrong," Pritzker said. "They ignore the fact that people and businesses are fleeing our state now under our current regressive tax system, yet states with fair tax systems on average grow faster and create more jobs than Illinois."

A household with $500,000 in household income would see their income tax increase by more than $6,500 annually, and one making $5,000,000 would pay an additional $150,000, according to Pritzker's plan.

Pritzker also proposed an increase from 5 percent to 6 percent for the state's current property tax credit, which is available for those filing individually with up to $250,000 in income or jointly with up to $500,000.

The plan also includes a $100 tax credit per child for single parents with incomes below $40,000 on a sliding scale up to $80,000, and those who file jointly with incomes under $60,000 on a sliding scale up to $100,000.

Tax rates were hiked to their current levels in 2017, when income tax rose from 3.75 percent to 4.95 percent for individuals and from 5.25 percent to 7 percent for corporations.

Pritzker said the alternatives to his plan would require 15 percent cuts to public safety, transportation, schools and universities or an across the board tax hike of 20 percent — from 4.95 percent to 5.95 percent, or $521 a year for a parent making $61,000.

There are only five other states with a flat income tax structure, the Associated Press reported, citing the National Conference of State Legislatures.

Representatives of Senate President John Cullerton and House Speaker Mike Madigan said the leaders of both chambers expressed support for the idea, according to the AP.

"In the weeks ahead, we’re looking forward to discussing and debating this proposal with members of the General Assembly on both sides of the aisle," Pritzker said. "I respect the right of opponents to disagree with this proposal. But they should do so in good faith with a specific counter proposal. Not pie in the sky. "

Illinois Republican leadership said the party was united in opposition to the proposal. State GOP Chair Tim Schneider said it would lead to "even more out-migration" of businesses, jobs and residents from Illinois.

"Tax-and-spend Illinois Democrats cannot be trusted with more of our tax dollars. That is why Illinois Republicans stand united against the Pritzker-Madigan tax hike and will continue to support reforms that will lower taxes, create jobs, and make our state thrive once again."

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UPDATE: State Income Tax Constitutional Amendment Passes Senate