Should those who make more money pay a higher percentage of their wages in state income taxes than others who make less?
I have a strong opinion about this topic but concede it's a fair question and one we should engage around honest debate. "Honest" being the key word in that last sentence.
So far, the discussion has been anything but.
Supporters of what's called a graduated income tax have the propaganda machine locked and loaded and already spitting out intellectually dishonest information about it. The dishonesty stems as much from what's not being disclosed as what is.
"The rich in Illinois have to pay more. It is a moral imperative," the union-owned Chicago Sun-Times wrote in an editorial this week, before presenting a one-sided argument to support their position.
Taxpayers need to see the whole picture and decide for themselves.
Illinois' constitution currently requires a flat income tax. Wage earners pay the state 4.95 percent of their income to help fund state services and retirement benefits for former state employees. That's up from 3.75 percent just a couple of years ago.
Now, Gov. J.B. Pritzker and Democratic lawmakers want to change the state constitution to allow for a graduated, or progressive, income tax. A progressive tax would allow the State of Illinois to tax income at different rates depending on how much an individual, family or small business earns. I include small business here because many small business owners file their business taxes as individuals rather than corporations.
Supporters of the graduated income tax require a supermajority in both the House and the Senate to get the measure on the 2020 ballot. If that happens, 60 percent of voters would need to approve it to change the constitution.
The Illinois General Assembly has debated this same issue in recent years but never has been able to get enough votes to get it out of both chambers. But after the midterm election in November, Democrats have more than the supermajorities they need in both the House and the Senate to get the amendment on the ballot.
And with newly inaugurated Pritzker replacing Republican Gov. Bruce Rauner, Democrats and their constituencies are putting on a full-court press to try to get this done.
When the issue was being debated a few years ago, proponents of changing the constitution referred to a graduated income tax as a "millionaire tax," as if it would only affect millionaires. That wasn't the case then and it's not now.
Taxpayers saw through that spin so supporters now are calling it a "fair tax," as if it's only "fair" to charge higher wage earners a larger percentage of taxes.
What supporters aren't saying is the dramatic impact incorporating a progressive — excuse me, fair — income tax could have on everyone here, including lower and middle income families. And this is what all taxpayers need to know.
First, Pritzker and Democratic lawmakers aren't disclosing details. If approved, we don't know what income levels will be taxed at which rates because the governor and other elected officials aren't telling us.
Are only millionaires going to see higher rates than the current 4.95 percent? That's unlikely, because that wouldn't bring in enough money to pay for all the spending Pritzker is proposing. So what's the income threshold for earners who will see their taxes climb above 4.95 percent? The only clue we have comes from a progressive tax measure proposed by state Rep. Robert Martwick, D-Chicago, a couple years ago. It would have increased taxes on anyone who made more than $17,300.
$17,300? That's hardly millionaire level wages. But Pritzker won't give us his proposed rates.
Second, small businesses — i.e., job creators — will undoubtedly be hurt regardless of rates and income levels. Faced with higher taxes, and short of raising their prices, business owners will compensate with cuts elsewhere. That means an untold number of middle-class Illinoisans losing their jobs.
Illinois also already places in the bottom third of states for its business tax climate. The Tax Foundation's 2019 State Business Tax Climate Index ranks Illinois at No. 36. The only reason the state isn't lower is because of its flat income tax. If that changes, Illinois' ranking plummets.
So who cares about that? Job creators, who make decisions on expansion, contraction and relocation based on business climate. Ultimately, those are decisions about jobs held by middle- and lower-income workers.
According to the U.S. Census, Illinois' population has declined by the tens of thousands in each of the past five years. Surveys have shown that high taxes prompt Illinoisans flee to other states.
And who is more equipped to pack up their belongings and head for greener pastures if their taxes go up? Many higher wage earners, including millionaires, can easily decide to relocate — or simply change their primary residence – rather than give Illinois state government more of their money.
All we need to do is look at the state of New York as an example. New York has one of the most progressive income tax systems in the country, with eight different income brackets. Income over $1 million is taxed at nearly 9 percent.
But New Yorkers discovered last week that the state has a $2.3 billion budget deficit as a result of its high taxes and federal tax reform.
“This is the flip side," New York Gov. Andrew Cuomo said. "Tax the rich, tax the rich, tax the rich. The rich leave, and now what do you do?”
When the rich leave, more of the tax burden falls on those left behind — middle- and lower-income wage earners.
Taxpayers need to know the full story as the graduated income tax debate continues. A "fair" income tax will affect workers in all brackets.