You’ve probably seen the ads on television telling you two different stories about the proposed amendment to the Illinois Constitution that is on the ballot for the November 3 election. It would amend Illinois’ method of taxation from flat tax to graduated tax. Those who support it, call it the “Fair Tax.” Those who oppose it, call it the “Tax Hike Amendment.” Each group calls the other “deceptive” and it can be difficult to separate facts from hype, so I decided to see what I could learn.
First, the advertising you see on television comes primarily from two groups, The “Vote Yes For Fairness” committee and the “Coalition to Stop the Proposed Tax Hike Amendment.” The first is primarily funded by governor JB Pritzker and the second is almost entirely funded by Illinois’ wealthiest resident, Ken Griffin.
Illinois has a flat tax. Everyone pays the same rate. For individuals that rate is 4.95%, regardless of household income. The proposal is to change from a flat tax to a graduated tax, where those who make more money, pay a higher rate. It is the way federal taxes and taxes in most other states work.
Under the proposed graduated system, there would be six rates. Everyone making under $250,000 per year would pay the old 4.95%, or an even lower rate of 4.75% or 4.90%. Those making more than $250,000 per year, would pay 7.75%. Those making more than $500,000 would pay 7.85%, and those making more than $1 Million a year would pay 7.95%. These rates are not written into the State constitution, so those who say the rates could change in the future are correct.
It is not true, however, that the change gives the legislature “new” power to raise taxes, which those who oppose the measure have said. The legislature already has that power. What this amendment does, is make it so that tax rates can be raised on those who make the most money, without raising the rate on those who make the least. It is good news for those whose income is lower, and bad news for those who make more than $250,000 per year, because raising their rate would not lead to a public outcry from the 97% of Illinoisans who would be unaffected. Right now, imposing a higher tax rate would be wildly unpopular, because it would apply to everyone. The step this amendment takes, to separate income brackets, would make it possible to change rates on those at the top, without affecting those with much lower incomes.
Another thing upsetting those who would be part of this new, higher-tax bracket is that all their income would be taxed at that 7.95% rate, not just the interval. I see where that is hard to swallow.
In the television ads, you see small business owners arguing both sides. The truth is, most small businesses don’t make more than $250,000 per year, though some do.
I’m always amused by the ad with the elderly woman who says she might have to move if these new rates go into effect. My husband and I joke that we hope we have a household income of more than a quarter-million dollars a year when we retire, just like she apparently has now! Given that we’ve never made close to that, though, I doubt it.
The full text of amendment is on the Illinois General Assembly’s website, ilga.gov. An easier-to-read version can be found at www.ballotpedia.org, a website which lays out the arguments for and against various pieces of legislation. Another fascinating tool is the “fair tax calculator” on the illinois.gov website. You can plug in your base income from your tax return, your filing status, your property taxes paid, and it will calculate your Illinois taxes under the new plan. Our household would save $150 per year.
Bottom line: If you make less than a quarter- million dollars a year, this amendment helps you now. It helps you in the future because your tax rate is no longer tethered to millionaires such as JB Pritzker and Ken Griffin.
Happy voting!