In his Jan. 29 State of the State address, Gov. J.B. Pritzker proposed a move from a flat tax rate to a progressive one, which would require a change to the state’s constitution. He also touts an agenda that makes fiscal stability a priority.
Pritzker's proposals have attracted the attention of many, including the Illinois Policy Institute, an organization dedicated to creating solutions that promote personal freedom and prosperity. While Pritzker calls the progressive tax “fair," Illinois Policy says it would hurt the state.
On Feb. 26, Illinois Policy chief economist Orphe Divounguy and research analyst Bryce Hill authored a piece on the group's website that says the so-called "Fair Tax” would cost Illinois more jobs than the state gained in 2019. Statewide, they predict a loss of 56,000 jobs – and the state only added 45,000 jobs in all of 2019.
“Illinois’ labor market is in desperate need of a jump start," Divounguy and Hill write. "Pursuing more tax hikes won’t boost jobs growth."
Voters will have the chance Nov. 3 to have their say on Pritzker’s progressive state income tax, and it doesn’t look to be a good one for the DuPage area. Using Illinois Policy's figures, on a per capita basis the policy could cost DuPage 4,000 jobs, although there is the potential for many more losses, due to the area’s high concentration of industry.
This is on top of an Illinois job market that was already sluggish in 2019, increasing just .7 percent, half the national average, according to Illinois Policy. Three metro areas actually saw jobs decline. Those are Davenport-Moline-Rock Island (-0.9 percent); Peoria (-1.1 percent); and Rockford (-1.0 percent). These declines happened amid a declining population in Illinois for the sixth year in a row.
The organization notes that the decision to scrap the state’s constitutionally protected flat-income tax would wreak havoc on the state’s economy, costing more jobs over the long run than the 52,500 jobs the entire Decatur metro area is currently able to sustain.
Not only that, but the organization says middle-income residents would probably pay more under the new tax, because it would yield less revenue than expected due to the loss of jobs.
“The state needs to pursue long-lasting reforms, such as constitutional pension reform." write Divounguy and Hill."It needs to tie growth in state spending to what Illinois taxpayers can afford, such as growth in state gross domestic product or personal income.”
Texas and Tennessee have cut spending and both have budget surpluses, no state income tax and lower property tax rates than Illinois, according to Divounguy and Hill.
The state may have an historic low unemployment rate in 2019, but it’s not tied to employment gains, according to Illinois Policy. Instead, the low unemployment rate is because of the declining labor force.The unemployment rate is still higher than the national average and most neighboring states, Illinois Policy notes.