Voters stuck in middle as Dems, GOP spar over ‘fair’ (or ‘terrible’?) tax shift

Illinois House Democrats moved Wednesday to get behind party gubernatorial nominee J.B. Pritzker’s support for a graduated income tax—and in the process begin providing political cover for themselves against a looming campaign onslaught from Gov. Bruce Rauner.

The House Revenue and Finance Committee voted late Wednesday afternoon to back a resolution sponsored by Speaker Michael Madigan calling for Illinois to switch away from its flat rate income tax and replace it with a “fair and progressive income tax.”

The resolution says the Legislature supports a progressive income tax that “must reduce taxes on low and middle income families while raising taxes on the wealthiest Illinoisans.”

But Republicans contend a progressive tax would hurt the middle class while driving more wealthy people out of Illinois and criticized Democrats for not specifying what tax rates they want to impose.

“This is all about raising taxes. This has nothing to do with fairness. This is a terrible idea,” thundered Rep. David McSweeney (R-Barrington Hills).

House Majority Leader Barbara Flynn Currie, the Chicago Democrat who appeared at the hearing in place of Madigan to defend the resolution, argued Democrats just want a more fair tax system and that future legislators would set the rates.

The Democratic resolution, approved Wednesday on a 7-3 vote, has no legal impact.

Changing away from Illinois’ flat income tax system would require an amendment to the Illinois Constitution, and legislators already missed the deadline to put such a question on the November ballot.

The next chance to put the matter before Illinois voters would be in 2020.

So why do this now?

Because Pritzker made clear his support for a graduated income tax during this year’s Democratic primary, and Rauner, who opposes the change, has shown he plans to make his opposition a central element of his re-election campaign.

House Republican Leader Jim Durkin of Western Springs, who helped get the ball rolling last month by signing up his GOP caucus on a resolution opposing a graduated income tax, asked Currie if the Democratic resolution was a response to his efforts.

Currie said she didn’t think so.

One way or the other, it sure looks as if Democrats decided they’d be better off playing offense on this issue than defense.

The committee heard testimony from numerous groups supporting the switch to a graduated income tax, both on the grounds it would be more fair and that it would be more efficient in generating revenue for the state in a time of the rich getting richer.

Among those testifying was Robert Otter of the left-leaning Center for Tax and Budget Accountability, which released a report this week saying Illinois could cut income taxes for 98 percent of taxpayers — and still generate $2 billion more in tax revenue than it does now.

The organization said this could be accomplished with a graduated tax that imposed higher rates on individuals with taxable incomes greater than $300,000.

The cuts would be achieved either through a new lower rate for everyone else or a middle-class tax credit.

Republicans argued Democrats would just “jack up” rates later after getting their foot in the door.

Rauner used to say Illinois needed to keep its flat tax because it was one of the few advantages the state could offer “job creators”— Raunerspeak for the wealthy employer/owner class.

Now, he says he wants to block a graduated income tax because of his concern for its impact on middle class taxpayers.

The thing about a progressive income tax is that it could be constructed in a way that results in a tax increase or a tax cut for middle income taxpayers — depending on where rates are set.

And where you set the rates depends largely on how much revenue you’re trying to collect.

Pritzker has avoided saying exactly where he would set the rates.

The political problem that creates for him—and perhaps more so for Democrats not running against the unpopular incumbent governor — is that it allows Rauner and the Republicans to create their own hypotheticals.

Now Democrats have a hypothetical of their own.