HOPF: Progressive tax discussion starts statewide and locally as temporary tax set to expire

Posted: Mar. 7, 2014 3:22 pm Updated: May. 30, 2014 5:15 pm

A proposal to amend the Illinois Constitution to allow a progressive income tax is starting to generate discussion statewide, including locally, as the state's individual rate of 5 percent is set to drop to 3.75 percent next year.

With the state setting revenues of $34.5 billion in the next fiscal year, it is looking at $1.5 billion in less revenue from the sun-setting individual and corporate income tax increase approved by lawmakers during the 2011 lame-duck session. The state could also have a bill backlog of $5.6 billion by the end of June. So there is a priority to find additional dollars in Springfield.

A poll released this week by the Illinois Policy Institute, which bills itself as a nonpartisan research and education organization, shows that nearly 56 percent of Quincy residents opposed a progressive tax. Another 12 percent are uncertain and about 33 percent are in favor of it.

A progressive tax would allow different tax rates based on income level. The more you make, the higher percentage you are going to pay. The Illinois Constitution currently only allows for a flat income tax.

Broken up by party ID, nearly 65 percent of Republican voters oppose a progressive tax, and so do about 53 percent of independents. While 43 percent of Democratic voters supported a progressive tax, 43 percent also opposed it.

The Feb. 16 poll conducted by We Ask America asked respondents if they would support or oppose a constitutional amendment "to change a graduated rate that requires you to pay a higher percentage as your income increases."

A plan supported by state Rep. Naomi Jakobsson, D-Urbana, would charge Illinois residents varying percentages for how much they earn. For example, all residents would pay 3 percent for the first $18,000 they earn. Income between $18,000, and $36,000 would be taxed at 4 percent, income between $36,000 and $58,000 would be taxed at 5 percent and between $58,000 and $95,000 would be taxed at 6 percent. The highest rate would be 9 percent for income above $500,000.

As an example, Jakobsson said an individual earning $58,000 would pay 4.1 percent -- the first $18,000 would be taxed at 3 percent, the second $18,000 at 4 percent and the final $22,000 at 5 percent. Additionally, a family earning $500,000 would pay 7.2 percent.

Let's not get ahead of ourselves here. There are many steps needed to take before the state changes its tax structure.

Lawmakers first would need to ask for voter approval for the constitutional amendment, which requires a three-fifths majority in both chambers to place it on the ballot. To be adopted, the proposed amendment needs either three-fifths of those voting on the question or a majority of those voting in the election.

While Democrats hold three-fifths majority in both chambers, it would be difficult to line up them all to support placing the question on the ballot, and even if it does go before voters, expect a deluge of special interest groups arguing in support and against the change. If it were to be adopted, lawmakers would have to decide whether to adopt a progressive tax and what the rates would be.

The constitutional amendment currently is waiting a hearing in the House Revenue and Finance Committee, and is sponsored by 38 representatives.

The amendment was introduced last May and has yet to be heard. Lawmakers could avoid seeking a progressive tax and instead seek to make the temporary tax increase permanent.