graduated income tax

Pritzker Says He's ‘Optimistic' About the Results of Illinois' Potential Graduated Income Tax Amendment

The Illinois governor said the state may not see final results until the end of the week

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Gov. J.B. Pritzker said he is optimistic about the results of Illinois' potential graduated income tax amendment seen on ballots across the state this election.

During his daily coronavirus briefing Tuesday, Pritzker said he will be following the results, but is confident in the outcome of his proposed progressive tax amendment to the Illinois constitution.

However, the governor said Illinoisans may not have results Tuesday night, as there is a specific method of calculating that could give the final tally by the end of the week.

Pritzker reminded that the "options for Illinois without the fair tax are not good," citing possible financial cuts in areas such as public safety, education and human services which are cause for concern amid the growing pandemic.

A graduated income tax, also called a progressive tax, is a tax structure that levies increasingly higher tax rates on higher-earning individuals or businesses. A binding vote to shift Illinois to this structure is on ballots statewide in the general election, with aggressive campaigns on airwaves around the state both for and against its passage.

The battle to change Illinois from a flat to a graduated income tax structure turned into a family affair last month.

Billionaire Jennifer Pritzker contributed $500,000 to the effort to convince voters to vote against the constitutional amendment on the November ballot - putting her in direct contention with her cousin, Gov. J.B. Pritzker, who has championed the proposal and poured millions of his own money into pushing for its passage.

Jennifer Pritzker gave $500,000 to the Coalition to Stop the Proposed Tax Hike Amendment political committee that is advocating against the ballot initiative, according to campaign finance disclosures filed with the Illinois State Board of Elections on Tuesday.

Gov. J.B. Pritzker ran for office in 2018 with the graduated income tax proposal as part of his platform and has pushed for its passage.

Gov. J.B. Pritzker has dubbed the initiative a "fair tax" and contributed a whopping $56.5 million to the Vote Yes for Fairness political committee advocating for its passage. A spokesman for that effort did not immediately respond to request for comment on Jennifer Pritzker's contribution Tuesday.

Both Jennifer Pritzker and J.B. Pritzker are billionaire heirs to the Hyatt Hotel fortune, part of one of the wealthiest families in the world, according to Forbes, that has continued to expand its fortune through various investments and holdings.

Democratic officials have largely expressed support for the change, while the generally tax-averse Republicans in Springfield all voted in lockstep against the measure.

Also pushing for the measure to fail and dropping major cash on the effort is another Chicago billionaire: Ken Griffin, the founder of hedge fund Citadel who is Illinois’ richest man, with Forbes estimating his net worth to be about $15 billion. A big-time Republican donor who previously gave Gov. Bruce Rauner’s campaigns more than $36 million, Griffin put nearly $47 million into the Coalition to Stop the Proposed Tax Hike Amendment, the same committee to which Jennifer Pritzker donated.

Illinois' current individual income tax rate is the same for everyone because the Illinois Constitution dictates that any income tax imposed by the state be "at a non-graduated rate." Any amendment to Illinois' Constitution, including the removal of that requirement, requires ratification by voters in a general election.

In 2019, Gov. J.B. Pritzker signed two separate pieces of legislation to change to a graduated income tax: a Constitutional amendment to repeal the state's flat tax requirement, and a new law to set the rates. The second won’t take effect unless voters approve the amendment, which can be ratified one of two ways: if three-fifths (or 60%) of people voting on the amendment approve it, or if a simple majority (50% plus one) of all voters, including those who skip the question on their ballots, approve it.

Here's how the question will appear on your ballot Tuesday, with an option to choose “Yes” or “No”:

Proposed Amendment to the 1970 Illinois Constitution
Explanation of Amendment

The proposed amendment grants the State authority to impose higher income tax rates on higher income levels, which is how the federal government and a majority of other states do it. The amendment would remove the portion of the Revenue Article of the Illinois Constitution that is sometimes referred to as the “flat tax,” that requires all taxes on income to be at the same rate. The amendment does not itself change tax rates. It gives the State the ability to impose higher tax rates on those with higher income levels and lower tax rates on those with middle or lower income levels. You are asked to decide whether the proposed amendment should become a part of the Illinois Constitution.

If the amendment passes, that alone won’t change the rates – it will only allow for the graduated structure. The second piece of legislation on this issue signed in 2019 sets new rates that would take effect beginning the year after the amendment is ratified – so on Jan. 1, 2021, if voters approve it in November.

If approved, the rates would be as follows:

  • For single and joint filers earning less than $250,000 per year, the first $10,000 would be taxed at 4.75%, then income between that and $100,000 would be taxed at 4.9%. From there, up to $250,000, the rate would be 4.95%, where it stands today.
  • Above $250,000, the rates begin to differ for single and joint filers. For single filers from $250,000 to $350,000, and for joint filers up to $500,000, the rate would be 7.75%. That increases to 7.85% for single filers reporting between $350,000 and $750,000 in income, and for joint filers from $500,000 to $1 million.
  • Under the new structure, single filers earning more than $750,000 and joint filers earning more than $1 million would be taxed at the top rate of 7.99%. For only that highest bracket, the taxpayers’ net income would all be taxed at that top rate, unlike the rest of the brackets.

It's important to note: For anyone paying below that top rate of 7.99%, the lower rates will not apply to all of your income. It works more like a ladder than a blanket rate, so the majority of residents’ first $10,000 would be taxed at the lowest rate. You would then pay the corresponding rates for each bracket, unless and until you reach the $750,000 mark - or $1 million for joint filers.

How will this affect you? Under this new structure, anyone making less than $250,000 a year would pay the current rate of 4.95%, with a slight decrease in the rates on their income up to $100,000. Pritzker said this means 97% of Illinois residents would pay the same or less in state income taxes.

Thirty-two other states in the U.S. and Washington, D.C., all have some form of a progressive income tax, ranging from 0% on the lowest earners in South Carolina to as high as 13.3% on incomes over $1,000,000 in California. Illinois and its Midwestern neighbors Indiana and Michigan are three of eight states that impose a flat tax.

Those opposing the amendment argue that it does not have any requirements on how the legislature is allowed spend the additional revenue and could pave the way for lawmakers to raise taxes again in the future – though the General Assembly has always held this authority, just previously confined to a flat rate.

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