Illinois needs a fairer income tax.
Illinois’ flat income tax — one that charges the same rate no matter how much money someone earns — hits those at the low end extra hard partly because they must spend a larger share of their income on necessities. Lower-income folks also are hit harder by a wide range of other levies, such as sales taxes, payroll taxes and property taxes. Add that all up, and the percentage of income a working-class person pays in overall taxes is much higher than the percentage paid by a wealthy person.
In contrast, a progressive income tax takes a higher percentage from people in the upper ranges of the income scale than it does from those at the bottom. That’s how the federal income tax is structured. It makes the entire tax load a little bit more equal, which should be a public policy priority in a nation moving toward ever wider income and wealth disparities.
To address the unfairness in Illinois’ tax code, state Rep. Christian Mitchell, D-Chicago, has introduced a constitutional amendment that would allow Illinois to switch to a progressive income tax. Both houses of the Legislature should give it the three-fifths backing it needs by the May 6 deadline to get the measure before voters on the Nov. 8 ballot. The proposed amendment does not need to be signed by the governor.
A progressive income tax is a basic reform that’s long overdue in Illinois. Thirty-three states have progressive income taxes, and only eight use a flat tax.
But as every day goes by, the flat taxes in those eight states grow more and more unfair.
Back when Illinois adopted an income tax in of 2.5 percent in 1969 and then decreed in the 1970 Constitution that it must always be a flat tax, the disparities in incomes among American households were not as great as they are today.
Since then, study after study has showed that the gulf between lower-income earners and those at the top is growing wider and wider. According to the Congressional Budget Office households with the top 1 percent of the nation’s wealth increased their incomes 275 percent between 1979 and 2007, while those at the bottom got just 18 percent more. It seems hardly a week goes by in which new research doesn’t come out that shows the richest are getting ever-higher incomes and piling up ever-more wealth while many average Americans struggle. It’s been a dominant theme of the 2016 presidential election.
As that gap widens, the unfairness of Illinois’ flat tax grows along with it. The bigger the disparity, the more lower-income people pay in taxes as a percentage of income than their wealthier neighbors. Moving to a progressive income tax would even things out a bit.
If Illinois does move to a progressive tax, it raises the question of what the new tax rates would be. A bill introduced by state Rep. Lou Lang, D-Skokie, offers some specifics on that score.
Lang would lower the current 3.75 percent flat rate to 3.5 percent for lower-income earners. He would raise the rate to 8.75 percent on the part of income over $564,000 a year for an individual and to 9.5 percent on income of more than $1 million. Lang says the vast majority Illinoisans would get a tax cut under this scenario, while the state would get an extra $1.9 billion a year.
We’re not sure exactly where the new rates should be set, as long as they are progressive, but we agree with lawmakers who say a clearly defined structure of new rates should be clearly spelled out before voters are asked to approve the constitutional amendment authorizing a progressive income tax.
Not every Democrat will support the constitutional amendment, so a few Republican votes will be needed, at least in the House. Any lawmakers who are wavering should remember that the idea of a progressive income tax is popular among Illinois voters. An advisory proposal for so-called “millionaire’s tax,” a form of a progressive tax, passed statewide in 2014 with about 60 percent of the vote. A poll by Tulchin Research released in April indicated 71 percent of Illinoisans would vote for a constitutional amendment permitting a progressive income tax.
No one likes to pay taxes, but everyone should agree that taxes should be as fair as possible. A constitutional amendment would move Illinois a long way in that direction.
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