Illinois State Income Tax Overhaul Question Remains Undecided

Grad Income Tax Election Day Art
Katherine Nagasawa, Mary Hall / WBEZ
Grad Income Tax Election Day Art
Katherine Nagasawa, Mary Hall / WBEZ

Illinois State Income Tax Overhaul Question Remains Undecided

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The proposal to move Illinois to a graduated income tax structure has an uphill fight in the days ahead, as it remains short of the votes needed to be ratified to the state constitution.

The Associated Press has not called the ballot measure defeated, though as of late Tuesday 55% of those who voted on the measure voted no.

The referendum asks whether the state should switch from its current flat income tax structure to a graduated one, in which the tax rate increases the more an individual or couple earns.

There are two ways in which the amendment would be ratified. One is if it garners at least 60% of yes votes on the question. And if that 60% threshold isn’t reached, then the amendment could win approval with support from a simple majority of those voting in the election.

Given the unprecedented number of vote-by-mail ballots requested this year, it could be days — or more — before Illinois election authorities know the final outcome.

“When all the votes are counted, we believe there will be more ‘no’ votes than ‘yes’ votes,” said Lissa Druss, spokeswoman for the Coalition To Stop The Proposed Tax Hike Amendment, which fought against the amendment.

But the main group advocating for the amendment’s ratification are not signing off on the measure’s defeat.

“Until every ballot is counted, we will stand with the Illinoisans who cast a ballot by mail, early and in-person today to ensure their voices are heard,” said Quentin Fulks, chairman of the Vote Yes For Fairness committee.

State law allows for vote-by-mail ballots to still be counted for another 14 days. As of Tuesday, more than 500,000 of those requested ballots had not been returned, according to data from the Illinois State Board of Elections.

Illinois currently taxes income at a flat 4.95% rate. But one top Democrat has suggested that lawmakers would take a vote to raise the tax by nearly a full percentage point if the ballot measure fails.

Illinois’ billionaire governor, Democrat JB Pritzker, however, has called that system fundamentally inequitable, saying wealthy people like him have avoided paying their fair share to the state for generations. He led the push to put the question on the ballot of whether Illinois should move to a graduated income tax system – which he calls a “fair tax” – arguing 97% of the state’s residents would see a tax cut.

Opponents questioned whether voters truly trusted Illinois’ elected officials to spend another $3 billion each year — the amount estimated to be raised from moving to such a system.

They also warned that the ballot question would lead to a new tax on retirement income, which is not currently taxed in Illinois. But nothing in the statute or the amendment would tax retirement income, which polls have shown is wildly unpopular.

The question has pitted billionaire against billionaire, making this ballot measure easily the most expensive of its kind in state history.

Pritzker gave $58 million of his own personal fortune to advocate for it.

Ken Griffin, the founder and CEO of the hedge fund company Citadel, contributed $53.7 million to oppose it.

The question on the ballot does not include specific income tax brackets and rates. But state lawmakers approved legislation that would establish what those would be if voters approve Tuesday’s referendum.

The ballot question would impose marginal income tax rates, whereby different portions of a person’s income are taxed at different rates. The first $10,000 a single or married couple earn would be taxed at 4.75%, and income from $10,001 to $100,000 would be taxed at 4.9% — a tax cut compared to the current flat rate. Income between $100,001 and $250,000 would be taxed at the current 4.95%.

The plan would then call for a spike in taxing income earned beyond $250,000 starting at 7.75%. The rates continue to rise until they top out at 7.99% – the rate applied to all joint income of $1 million or more.

Of Illinois’ 6.2 million individual tax filers, more than 6 million tax filers would see no increase or a decrease in their tax rates, according to data compiled by the Illinois Department of Revenue.

That leaves fewer than 175,000 filers paying more and accounting for the entirety of the $3 billion-plus the graduated income tax is expected to generate annually, according to the agency’s data.

Before the pandemic, Pritzker had staked his political reputation on moving the state to a graduated income tax system. The governor has not said whether he intends to seek re-election in 2022 but made clear that decision doesn’t hinge on the outcome of the Nov. 3 vote.

“The political considerations are not top of mind for me,” he recently told WBEZ. “As you’ve seen with everything that I’ve worked on around the COVID-19 pandemic, my goal is to do a good job for people in Illinois. In the end, whether I run for re-election or not, I think people will make their judgment based upon the success or failure of the policies that we’ve put in effect and how we dealt with the crises that are coming at us.”

Tony Arnold covers Illinois state politics for WBEZ. Follow him @tonyjarnold.