[15] William McBride, “What is the Evidence on Taxes and Growth?,” Tax Foundation, Dec. 18, 2012, https://taxfoundation.org/what-evidence-taxes-and-growth/. With 93 percent of votes counted, it appears the Illinois Fair Tax Amendment did not pass in the general election. Illinoisans will have the option to vote on whether or … [3] The name references the tax they replaced rather than the nature of the taxes themselves, which are nothing more than additional income tax levies of 2.5 percent on corporate income and 1.5 percent on the income of partnerships, S corporations, and trusts, with revenue devoted to local government. Our work depends on support from members of the public like you. The current income tax is a flat 4.95% for everyone, no matter how much you earn. A marriage penalty typically occurs when two individuals with similar incomes marry; this is true for both high- and low-income couples. Option 3: Fair Income Tax Illinois would change its system so the wealthy pay more, like in 33 other states. Imagine a two-earner household where both partners make $100,000 in taxable income. With the new $10,000 cap on the state and local tax (SALT) deduction, high earners in high tax states no longer receive a generous federal tax subsidy to offset their state and local tax liability. [11] Governor Pat Quinn proposed extending the 5 percent flat tax indefinitely, while other groups sought to use a graduated tax to raise revenues. I'm confident that Illinois voters will join me in rejecting the Jobs Tax Constitutional Amendment next November. Greg Baise, former president of the Illinois Manufacturers’ Association, formed the Vote No on Blank Check Amendment Committee to oppose the Illinois Fair Tax. Legal Council for Health Justice is proud to stand with more than 115 organizations across Illinois in supporting the Vote Yes for Fair Tax Campaign . [7] Even in Minnesota, legislators adopted individual income tax cuts to offset additional revenue from tax conformity. The state’s relatively low single-rate individual income tax has historically been one of the few saving graces in a state with otherwise high and economically inefficient taxes. In this March 7, 2019, file photo, Gov. 2 million retirement age Illinoisans could face 'fair tax' 16% of Illinois' total population is age 65 or older. ... Fair Tax overhaul clears final Senate hurdle Senator Hutchinson Argues on Behalf of Working Families as the Senate Advances the Fair Tax Follow ILSenDems. Additionally, Arkansas has different tax schedules for different income classes, such that people with higher incomes still face a graduated rate schedule, but a different schedule than one that a middle- or low-income filer would face. individuals and one such tax so imposed on corporations. [13] Office of the Governor of Illinois, “Gov. Many states double their bracket widths for married couples to avoid the penalty, but the Illinois proposal envisions brackets for joint filers that differ only slightly from those that apply to single filers. Opponents and skeptics contended that was misleading since the current law in 2014 prescribed a decline in the personal income tax rate to 3.75 percent in 2015, after the expiration of a 2011 temporary surtax. Sources: IRS Statistics of Income; Tax Foundation calculations. The 7.99 percent rate on nonbusiness income would be the eighth-highest state rate in the country. The Tax Foundation works hard to provide insightful tax policy analysis. Illinois’ current tax system is fundamentally unfair, disproportionately burdening our middle and lower-income families while creating income inequality in our state. Indiana has reduced its top corporate income tax rate from 8 to 5.25 percent and is on track to bring it down to 4.9 percent by 2022, while its individual income tax rate has gone from a flat 3.4 percent to 3.23 percent over five years. The move means Illinois voters will decide next year if the state’s flat-tax structure should be removed from the constitution and replaced with a graduated income tax. This legislation would take effect on January 1, 2021 if voters approve the constitutional amendment in November 2020. We work hard to make our analysis as useful as possible. Help us continue our work by making a tax-deductible gift today. Property tax credit is a 20 percent increase on top of the existing property tax credit. Here is how the ballot language will read: [91][92][88][93] In endorsing the Fair Tax proposal, a coalition of 125 labor unions in the state argued that it would reduce economic inequality and would enable increased funding for public education and healthcare. [2] Office of the Governor of Illinois, “Fair Tax for Illinois,” presentation, March 7, 2019, https://drive.google.com/file/d/14cV8N3i8krcYnspkpoybbf1xgvat4G EA/view. SPRINGFIELD OFFICE (217) 782-2728. Under the rate structure set forth in S.B. While many small businesses pay through the individual income tax because they are organized as pass-through entities, traditional C corporations are double-taxed, paying taxes at both the entity level and again at the ownership level, so an attempt to keep the corporate rate aligned with the top individual rate only exacerbates an existing disparity. [45], Two organizations have been formed to campaign against the Fair Tax amendment. This amendment, if passed, may allow Illinois’ current flat tax rate to be replaced with a progressive income tax. J.B. Pritzker outlines his plan to replace Illinois' flat-rate income tax with a graduated structure at the State Capitol in Springfield, Ill. Voters will decide whether to replace the current flat tax with a graduated state income tax. For instance, under S.B. A Fair Tax would provide vital funds to the community services that keep Illinoisans healthy and safe, and lift families out of poverty. On January 28, 2019, Senator Don Harmon introduced a joint resolution that would propose a constitutional amendment allowing the Illinois government to change from a flat tax rate to a graduated rate. The mailers, TV commercials and phone calls are coming at residents from groups in favor of and opposition to the so-called fair tax. The shareholders are then responsible for paying individual income taxes on this income. The fair income tax would allow us to generate that income at the statewide level and push down the pressure on property taxes. A pass-through business is a sole proprietorship, partnership, or S corporation that is not subject to the corporate income tax; instead, this business reports its income on the individual income tax returns of the owners and is taxed at individual income tax rates. “Illinoisans recognized the progressive tax for what it really was: just another tax hike to let Illinois politicians avoid structural reforms,” says Ted Dabrowski, president of Wirepoints,an independent, nonprofit company delivering original research and commentary about Illinois’ … While $1 million is undoubtedly a lot of money, over half of all pass-through business income is reported on returns with more than $1 million in business income alone (to say nothing of other income sources), and almost 72 percent comes from returns of $500,000 or higher. The PPRT on corporate income, moreover, is one percentage point higher than the PPRT on pass-through income, leading to a higher combined rate on corporate (10.49 percent) than pass-through (9.49 percent) income under the proposal. Washington, DC 20005, Banner image attribution: Adobe Stock, Андрей Клафилин, Tax Expenditures, Credits, and Deductions, Taxes on Savers, Investors, and Entrepreneurs, Small Business, Pass-throughs, and Non-profits, Analysis of 2020 Presidential Tax Proposals, Research & Analysis of Digital Tax Policies, Consumption Tax Policies in OECD Countries, Sources of Government Revenue in the OECD, Opportunities for Pro-Growth Tax Reform in Austria, Tax Proposals, Comparisons, and the Economy, https://www2.illinois.gov/rev/localgovernments/Pages/replacement.aspx, https://taxfoundation.org/state-tax-reform-lessons-2018/, https://www.claconnect.com/resources/articles/2018/missouri-cuts-corporate-and-individual-income-tax-rates-and-more, https://taxfoundation.org/whats-iowa-tax-reform-package/, https://taxfoundation.org/kentucky-tax-reform-package/, https://taxfoundation.org/minnesota-tax-conformity/, https://www.irs.gov/statistics/soi-tax-stats-historic-table-2, https://cdn.advocacy.sba.gov/wp-content/uploads/2019/04/23142647/2019-Small-Business-Profiles-IL.pdf, https://www.illinoispolicy.org/illinois-ranks-46-out-of-50-states-in-private-sector-jobs-growth/, https://www2.illinois.gov/Pages/news-item.aspx?ReleaseID=19772, https://www.reuters.com/article/us-illinois-budget/illinois-governor-looks-to-income-tax-change-to-boost-fiscal-year-2021-revenue-idUSKBN20D2NF, https://taxfoundation.org/what-evidence-taxes-and-growth/, https://www.census.gov/programs-surveys/gov-finances.html, https://taxfoundation.org/publications/state-business-tax-climate-index/. 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