State Capitol, February 27, 2019 — Passing a constitutional amendment to allow the state to tax higher income earners at a higher tax rate, known as a “Progressive Tax” is a key element of Gov Pritzker’s financial plan to fix Illinois’ finances. But House Republicans say “No Way” will they go along in support of that effort.
The House GOP say they are united in opposition and argue that instead of bringing in more tax revenue, this would be one more reason for Illinois business owners to move out of Illinois. Many small businesses are organized as an “S-Corporation” in which the earnings of the corporation are counted as the income to the owner. While the current rate of taxation on income in the state is a flat tax of 4.95%, they say business owners would face an undue burden on their income if the state then takes more of what they earned.
The Republican House members say that passing a progressive tax designed to tax upper income earners at a higher rate, is not going to be an incentive to create a better business environment in the state. They point out that Illinois is already losing population, and states like Florida and Texas operate without any income tax. But in the face of mounting financial challenges, of unpaid bills over $8 Billion, of unfunded pension debts of over $200 billion [ no one really knows just how large those unfunded debts actually are], the state is not pulling in enough tax revenues to pay its bills.
Gov Pritzker therefore is pushing for the state to pass an amendment to change the income tax from a flat tax to a progressive tax, that he and his supporters argue would allow for a reduction of taxes on lower income earners, and by taxing higher income earners more, the state would collect more money — the funds needed to pay for the costs of services the state now struggles to cover.
Republicans say this ignores the fact that Illinois taxpayers are already being taxed out of their homes, and pay an unfair and noncompetitive tax burden, especially compared to other Midwest states. They note the Governor has not made cuts to help balance the state’s budget, and continues to call for more spending in his just proposed budget.
