Illinois’ governor said small businesses in Illinois should be paying higher taxes and that taxpayers can expect deep cuts to government services if they don’t approve his $3.4 billion progressive tax plan.
Gov. J.B. Pritzker visited Belleville City Hall on Monday to promote his plan. He was backed by mayors from the Metro East area who support changing the state constitution’s flat income tax to a structure where those who earn more pay higher tax rates. The governor’s tax proposal includes modest rate reductions from the state’s existing 4.95 flat rate for 97 percent of taxpayers. Those making more than $250,000 a year would pay 7.75 percent or more in state taxes.
“Wisconsin, Missouri, and Iowa all use a fair tax approach, and it’s time for Illinois to get on board,” Fairmont Mayor Michael Suarez said. “We can’t afford to continue on with our unfair flat tax while other states do this right.”
Businesses would also have to pay more, the governor said.
“I believe that it’s fair to ask the 3 percent at the top to pay a little bit more so that we can get this state moving again, so that we can actually get past the fiscal challenges,” Pritzker said Monday.
Illinois has more than $15 billion in unpaid bills, just under half of which is bonded debt. There’s also the $134 billion in unfunded public pension liability and tens of billions of estimated other post-employment benefits for state employees.
State Rep. Blaine Wilhour, R-Beecher City, said increasing the flat rate of 4.95 percent to a progressive tax of 7.75 or higher, isn’t a “little bit more.” Wilhour said for anyone making more than $250,000 a year, including small business owners, such an increase will mean fewer jobs.
“It’s not going to be good. It’s a jobs killing tax there’s no doubt about that,” Wilhour said. “We need to be working on lowering taxes and cutting our spending.”
Pritzker’s proposal would have the lowest income earners, those making up to $10,000 a year, paying a 4.75 percent income tax rate to the state. The governor’s office said that represents 27.2 percent of Illinois taxpayers. Those making up to $100,000 would pay 4.90 percent. That group includes 58.9 percent of taxpayers. The existing 4.95 percent rate would stay the same for those earning up to $250,000, which is 11.1 percent of the state’s taxpayers.
From there, the rate jumps nearly 3 percentage points to 7.75 percent for people making up to $500,000. That’s 1.9 percent of taxpayers. Those earning more than $500,000 would pay 7.85 percent. People with income of $1 million or more would pay the state 7.95 percent on all income.
Businesses filing as corporations would see a flat tax under Pritzker’s plan, but the rates would increase from 7 percent to 7.95 percent.
Lawmakers less than two years ago increased income taxes by $5 billion over former Gov. Bruce Rauner’s veto, and they spent every bit of it and then some.
Pritzker wants to change the state’s constitution to implement progressive rates, taxing higher earners at higher rates, to capture $3.4 billion more. If voters don’t approve the progressive tax proposal at the ballot box, the governor said deep cuts would be needed after paying all the state’s bills.
“You’re left without about $19 billion and that’s where you’d have to cuts,” Pritzker said. “It’s in public safety, it’s in education, it’s in economic development, it’s in universities.”
Pritzker said he is regularly looking at state programs to find efficiencies and will continue to do so, but said he continues to push for a progressive income tax to bring stability to the state’s budget.
Wilhour said Illinois needs to grow revenue by growing the state’s economy, and that should be done with tax cuts and reforms that would help businesses grow.
“We’ve got all of these promises of the shrinking tax base, so taxpayers are going to be on the hook for this no matter what,” Wilhour said.
Wilhour said Pritzker’s projections that the progressive structure would bring in $3.4 billion in new revenue aren’t guaranteed and could force lawmakers to later push tax rates higher not just for the rich, but also for the middle class. With the tax rates not set in stone in a progressive plan, and with how policymakers have historically handled the state’s finances, he said it will be difficult for voters and taxpayers to trust state lawmakers.