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Illinois Graduated Income Tax Fight Heats Up 

Posted on May 20, 2020

Illinois GOP leaders are pushing hard to block a proposed graduated income tax from appearing on the November ballot.

House Joint Resolution 123, filed May 18 by House Republican Leader Jim Durkin, would withdraw from the November 3 ballot S.J.R. Constitutional Amendment 1, which would allow the state to levy a graduated income tax. 

The amendment was approved by the legislature in May 2019. It would need support from three-fifths of those voting on the question or a majority of those voting in the election for it to be enacted.

The state currently levies a flat 4.95 percent income tax. Companion legislation passed in June 2019 (S.B. 687) would create six income tax brackets with rates ranging from 4.75 percent to 7.99 percent. The legislation would also increase the corporate income tax rate to 7.99 percent. The bill will not take effect unless Illinois voters approve the constitutional amendment.

Speaking during a May 18 League of Women Voters of Illinois webinar, Senate Republican Leader Bill Brady said he and Durkin "believe there is no worse time than now to be threatening the voters of this state with a tax increase and the businesses who we’re going to rely on rebuilding our economy.” The lawmakers "called . . . for Democrats to allow us to vote to withdraw that amendment and deal with that when times aren't as uncertain as they are now," Brady added.

Legislative leaders are scheduled to return to Springfield May 20 for a three-day special session addressing the COVID-19 pandemic, the state budget, economic recovery, the 2020 general election, and the hospital assessment program, according to a joint proclamation from House Speaker Michael Madigan (D) and Senate President Don Harmon (D).

While state GOP leaders work to prevent a tax increase at the state level, five U.S. representatives sent a letter urging congressional leaders to block federal aid if Gov. J.B. Pritzker (D) follows through on "recent threats . . . to possibly withhold federal aid provided through the State of Illinois from any local government that reopens . . . ahead of Governor Pritzker’s own arbitrary timetable." The governor said during a May 12 press briefing that he would consider withholding such aid.

"On top of Governor Pritzker’s ongoing campaign to persuade Illinois voters to raise the state income tax on small businesses in November, the Governor’s latest threat to withhold federal assistance from communities in need is unconscionable," the May 15 letter said. “While Congress should consider prohibiting Illinois from raising income taxes on small businesses as a condition of state aid, we urge you to act immediately to ensure no governor can withhold federal funds appropriated by Congress for local municipalities that allow their small businesses to reopen in accordance with federal health guidelines.”

The letter was signed by U.S. Reps. Darin LaHood, John Shimkus, Adam Kinzinger, Rodney Davis, and Mike Bost, all Republicans representing Illinois.

The graduated income tax has had steady support from voters: Approximately 65 percent of those polled favored the constitutional change to allow a graduated income tax, according to a poll conducted by the Paul Simon Public Policy Institute at Southern Illinois University Carbondale released March 3.

Also, 68 percent supported a 3 percent surcharge on annual incomes above $1 million. A so-called millionaire's tax was approved as an advisory referendum by 60 percent of voters during the November 2014 election; legislation implementing the tax was proposed several times but never enacted.

Support for the graduated income tax grew to two-thirds and has remained consistent for several years, according to Charlie Leonard, who co-directed the poll for the Paul Simon Public Policy Institute.

“It has bounced around a little bit, but two-thirds or more is average. You just don’t get more stable than that,” Leonard told Tax Notes.

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