Voters will decide by referendum whether Illinois should adopt a graduated income tax now that both chambers of the state legislature have passed the Joint Resolution Constitutional Amendment No. 1.
If passed by voters, the graduated income tax, also known as the progressive tax, will replace the state’s current flat income tax.
But Illinois Policy disagrees with the amendment.
"The governor's progressive income tax proposal would directly hit more than 100,000 small businesses in the state just after they've been ravaged by the economic shutdown ordered to contain the COVID-19 pandemic,” said Adam Schuster, budget and tax research director at Illinois Policy Institute.
As of June 6, 2020, the Illinois Department of Health reports 125,915 coronavirus cases statewide and 5,795 deaths.
“Small businesses are Illinois' primary job creators, and they need protection and stability as the state and nation recovers from this health crisis,” Schuster told the DuPage Policy Journal.
Illinois Gov. J.B. Pritzker introduced the graduated tax rate as a means to ease the burden on middle-class families because it would earn the state $3.4 billion in added revenue, as previously reported. Opponents, however, say it does nothing to stop rising pension gaps, health coverage prices or taxation on properties.
“It's not a partisan issue,” Schuster said in an interview. “Economists all agree that lawmakers should not raise taxes during or just after a recession, and all signs indicate the country is sliding into a recession.”
According to the U.S. Bureau of Labor Statistics, Illinois was among the top then states with the highest unemployment at 16.4 percent, compared to 28.2 percent for Nevada, the highest, and 7.9 percent for Connecticut, the lowest.
"Lawmakers just passed a budget with record-high spending, in which they made no serious attempt to balance, and they're relying on billions in a blank check bailout from the federal reserve,” said Schuster. “There isn't anything stopping lawmakers from asking taxpayers for more to cover for their mismanagement. They should be denied both."
A survey by the Ideas Illinois group, which opposes the progressive income tax, found that 46 percent of Illinois voters felt that the proposed tax would hurt the state economy and could cause businesses to flee to more tax-friendly states.
“Illinois Policy is devoted to supporting policy solutions that create fairer, more prosperous outcomes for Illinoisans who need them the most,” Schuster said.
Some 74 percent of Republicans, 46 percent of independents and 25 percent of Democrats opposed the graduated income tax, according to the study.
The Illinois Policy Institute is among the organizations that signed off on a letter sent to the legislature on May 19, 2020 requesting repeal of Senate Joint Resolution Constitutional Amendment 1.
The letter specifically states, “the introductory rates associated with the amendment would hike taxes on an estimated 100,000 pass-through businesses in Illinois. Small businesses are the economic engine of the state – responsible for roughly 60% of new job creation. Now is the wrong time to raise taxes on job creators and businesses and inject additional uncertainty into the state economy.”
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