Everything you need to know about the proposed graduated income tax

Illinois residents will be voting on a graduated income tax proposal in November. Here is everything you need to know about the referendum.

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Ashlee Rezin Garcia/Sun-Times

When Illinois voters head to the polls on Nov. 3, 2020, they will vote on an amendment to the Illinois Constitution which would allow state lawmakers to impose a graduated income tax.

graduated income tax

At a November 2019 forum hosted by the Chicago Sun-Times and AARP Illinois, policy experts laid out the pros and cons of Gov. Pritzker’s proposed graduated income tax.

Currently, the state constitution mandates that income tax be levied at a flat rate across all incomes.

Voting ‘yes’ means support for changing to a graduated income tax, and voting ‘no’ signals opposition to a graduated income tax.

But what exactly is a graduated income tax? And how will it affect your taxes? Sun-Times politics reporters Tina Sfondeles and Rachel Hinton put together a guide of everything you need to know before voting on the issue.

What is a graduated income tax?

The specific progressive income tax Gov. J.B. Pritzker has proposed would raise taxes only on people who earn $250,000 or more a year — incomes between $250,000 and $500,000 would be taxed at 7.75 percent. It would maintain the current tax rate of 4.95% on incomes between $100,000 and $250,000. And it would reduce the rate on incomes of $100,000 or less.

Income from $500,000 to $1 million would be taxed 7.85 percent and income over $1 million would be taxed 7.99 percent. The corporate tax rate within the package would also be raised to 7.99 percent.

Voters will not be voting on the specific taxes rates or brackets, but rather, on amending the Illinois Constitution to allow for such a system to be implemented. Currently, the Illinois State Constitution requires that taxes based on income must be levied at non-graduated rates.

Democrats have said the new personal income tax rates would bring in $3.57 billion, and the new corporate tax rate would bring in $350 million.

The current income tax levied on all taxpayers is 4.95%. The flat tax rate, which has fluctuated over the years, has been part of the Illinois constitution since 1970, a year after income tax was first enacted in Illinois. With a constitutional change, the Pritzker administration estimates that 97% of Illinois residents will see at least a modest decrease in their income taxes.

Why is there a referendum? Why is this coming up for a vote?

The Illinois Constitution lays out the rules for how an amendment introduced in the Legislature can be adopted. To become part of the constitution, a proposed amendment must be approved by either 60 percent of those voting on the question or a majority of those voting in the election.

How do I figure out how much I might pay under a graduated income tax?

Use the state’s calculator linked below to see how much your income taxes might change.

How many states have it?

Thirty-four states have a graduated income tax.

When would the new rates take effect?

The new income tax rates are currently set to go into effect Jan. 1, 2021.

Who stands to benefit?

The money generated from the tax will help pay off the state’s bill backlog which stood at $6.29 billion on Jan. 3 and some middle and low-income taxpayers will see some savings.

Find out how much your income taxes might change under the proposed legislation using the state’s graduated income tax calculator.

Graduated Income Tax Calculator
How much more or less could your income taxes be?

History of Income Tax in Illinois

Illinois has collected individual income tax since 1969, when the tax rate was 2.5%.

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Read our previous coverage of the proposed graduated income tax:

Deep pockets dog fight? Billionaires Ken Griffin and Gov. Pritzker dig into wallets in battle over income tax

September 4, 2020
As big as the eight-figure donation is from Ken Griffin, the founder and CEO of hedge fund Citadel, it’s a fraction of what Gov. J.B. Pritzker has already ponied up on the other side.

Union leaders vow to campaign for ‘Fair Tax’ amendment

September 3, 2020
With working families under duress, labor groups say a graduated tax would make high-income earners pay a fair share.

Taxing messages: Opposing sides in graduated income tax battle move to captivate captive audience

July 7, 2020
With the COVID-19 pandemic grinding much of everyday life to a halt, the groups have the benefit of reaching out to taxpayers in an unprecedented setting that has millions of people working from home and glued to their screens.

EDITORIAL: How do we thank ‘essential workers?’ Vote for a graduated Illinois income tax on Nov. 3

April 26, 2020
The coronavirus pandemic vividly reveals the unfairness of a flat income tax, in which every dollar is taxed at the same rate no matter how rich or poor you are.

Pritzker’s budget message: Pass graduated income tax or lose $1.4B for schools, healthcare

Feb. 19, 2020
There’s another budget proposal included in the 2021 budget book and discussed in lawmaker briefings that includes the fictional world of a graduated income tax.

Pritzker’s ‘fair tax’ dissected at Oak Park forum

Nov. 5, 2019
The pros and cons of Gov. J.B. Pritzker’s signature issue — a proposed graduated income tax — were discussed and dissected at length during a panel discussion in November.

Economic report by Gov. Pritzker’s budget office pushes ‘fair tax’ as solution to state’s woes

Oct. 23, 2019
The Governor’s Office of Management and Budget report concluded there are “few alternatives” if the “Fair Tax” amendment isn’t enacted, including a 15% cut to essential services.

Lightfoot: ‘Can’t keep taxing the hell’ out of substantial earners, but aide vows she still supports graduated income tax

Aug. 30, 2019
Fresh off a televised address outlining an $838 million deficit, Mayor Lori Lightfoot said “we can’t keep taxing the hell out of all of our people who make substantial incomes” — despite her previous support of Gov. J.B. Pritzker’s graduated income tax plan.

EDITORIAL: Beware of the disinformation campaign against a fairer tax for Illinois

Aug. 9, 2019
The nature of the levy — progressive income tax versus flat income tax — makes it no harder or easier, politically speaking, to raise taxes on the middle class. But that’s not what progressive-tax opponents want you to hear.

Pritzker signs budget, income tax rates bill for his ‘fair tax’ plan — touts ‘new era of fiscal stability’

June 5, 2019
Pritzker signed the income tax measure, as well as three budget bills — the operating budget, the revenue for the spending and a budget implementation measure.

Graduated income tax question heads to ballot as House OKs constitutional amendment

May 27, 2019
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.

‘Fair tax’ or ‘jobs tax’? Democrats launch Pritzker’s tax fight as GOP objects

April 9, 2019
Illinois Senate Republican Leader Bill Brady, R-Bloomington, said his caucus opposes the changed tax structure because it doesn’t provide middle class protections and opens the door for the “Democratic majority” to alter rates at any time.

Gov. Pritzker unveils proposed graduated income tax rates, Republicans balk

March 7, 2019
After more than a year of dodging specifics on the campaign trail, Pritzker unveiled the proposed tax rates, which he’s touted as an essential fix for the state’s dire finances.

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