What To Know About The Income Tax Question On Your Illinois Ballot

Graduated Income Tax ballot
On the Nov. 3 ballot, Illinois voters are being asked whether to change the state's constitution to allow for a graduated income tax structure, instead of the current flat-rate structure. That would leave wealthier people paying higher income tax rates. WBEZ
On the Nov. 3 ballot, Illinois voters are being asked whether to change the state's constitution to allow for a graduated income tax structure, instead of the current flat-rate structure. That would leave wealthier people paying higher income tax rates. WBEZ
Graduated Income Tax ballot
On the Nov. 3 ballot, Illinois voters are being asked whether to change the state's constitution to allow for a graduated income tax structure, instead of the current flat-rate structure. That would leave wealthier people paying higher income tax rates. WBEZ

What To Know About The Income Tax Question On Your Illinois Ballot

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Would taxing wealthy people at a higher rate finally put Illinois on a path to fiscal stability and income equality?

Or would it drive the upper class — and their businesses — to other states with lighter tax burdens, worsening the state’s financial woes?

Deluged by what already is a historically expensive ballot initiative, voters have been inundated with messages about changing the state constitution to impose a new way of collecting Illinois income taxes.

The state now taxes income at a flat rate of 4.95% — regardless of anyone’s income. The state has used this flat-tax system since 1969, with rates ranging between 2.5% and 5% during the past 51 years. Illinois is one of just nine states with a flat income tax.

Calling that system inherently inequitable, billionaire Democratic Gov. JB Pritzker campaigned to change it in 2018, and he’s now leading the charge to pass a constitutional amendment to establish a graduated income tax in Illinois. It’s a concept where tax rates would be based on how much a person or married couple earns, with richer people paying higher tax rates.

“The fact is that we all need to pay something and the question that people need to ask themselves is, ‘Is it fair that a nurse or a firefighter or a frontline grocery store worker pays the same rate as Ken Griffin or any of the wealthiest people in Illinois?’ ” Pritzker said, referring to the mega-billionaire Chicago hedge fund operator fighting the tax amendment.

“No, that’s not fair,” the governor told WBEZ in an interview last week.

Pritzker said the state’s frail financial condition warrants an infusion of new tax dollars. As of early October, the state’s stack of unpaid bills stood at $8.3 billion, and as of June, its unfunded pension liabilities stood at nearly $137.2 billion.

“I think it’s an extraordinarily important inflection point for the state,” the governor said.

But there is a sizable opposition to the proposal, funded mostly by some of Illinois’ wealthiest individuals who warn that voting yes is akin to writing a blank check to a state that has a notorious history of dismal finances.

Who would pay more — and who wouldn’t

Amendments to the Illinois Constitution can pass in one of two ways: getting approval from at least 60% of votes cast on the particular ballot question or a simple majority of all ballots cast in the election.

But the number most often pushed by Pritzker and other supporters is 97% — the share of Illinois’ taxpayers would see their taxes stay the same or drop if the amendment passes, according to his administration’s calculations.

The change would impose personal tax rates ranging between 4.75% and 7.99%, depending on a person’s income.

Retirement income is not taxed in Illinois and would not be under that proposed constitutional amendment tax framework if the amendment passes. Opponents to the amendment have advertised that it would lead to a tax on retirement income. But nothing in the statute establishes rates for such an idea, which polls have shown is wildly unpopular.

Of Illinois’ 6.2 million individual tax filers, more than 6 million tax filers would see no increase or a decrease, 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.

Pritzker’s own tax filings offer one measure of how the new rates would affect the state’s wealthiest people.

For calendar year 2018 – the most recent tax filing the governor has made public — he and his wife, MK, declared net income of more than $4.3 million. Taxed at the current 4.95% income tax rate, they paid $215,885 in state income taxes. Under a 7.99% tax rate that would apply to Illinois’ first family under the new tax structure, that state tax burden would rise to $348,468 — for an increase of $132,583.

Clash of the billionaires

Debate over the tax amendment has shaped up as a clash between two of the wealthiest people on the planet.

As of last week, Pritzker was ranked No. 766 on Forbes’ list of billionaires, with estimated assets of $3.4 billion. The governor has invested $56.5 million of his personal wealth into a political action committee pushing the graduated income tax.

On the opposite side is Griffin, who was No. 120 on the Forbes list last week with $15 billion in estimated assets. Griffin has invested nearly $47 million of his personal funds into a committee aiming to defeat the amendment.

Griffin would not agree to a WBEZ interview. But in a statement, he blamed the governor and Illinois’ Democratic House speaker for the proposal, and predicted an economic apocalypse in Illinois if the tax amendment passes.

“Every citizen has a right to the truth about what Gov. Pritzker and Mike Madigan’s tax increase will mean for our state: the continued exodus of families and businesses, loss of jobs and inevitably higher taxes on everyone,” he said in a statement, calling the amendment “catastrophic.”

Pritzker, who said he knows Griffin and that the two have “seen each other in a variety of business circumstances,” ridiculed his rival’s doomsday scenarios.

“Quite a number of wealthy people have contributed on the other side of this issue, and it’s because they share the same thought — which is that they’re gonna have to pay a little more in taxes and they’d rather not,” Pritzker said. “And so it’s cheaper for them to write checks to oppose what’s good for 97% of people in Illinois and try to obfuscate about what the real issue is here. They’re the ones who have been benefiting from the system as it is, and that’s why they don’t want any change.”

One part left unsaid in Griffin’s statement, however, is the possibility that if voters reject the graduated income tax, then state lawmakers may raise the flat tax rate on everyone. Lt. Gov. Juliana Stratton recently said it could be raised nearly a full percentage point.

The battle among billionaires has already easily set a record for money devoted to a ballot measure in Illinois. The previous spending record for a constitutional initiative here came in 2014, when $7.1 million was spent to help pass an amendment dealing with crime victims’ rights, according to the Helena, Mont.-based National Institute on Money in Politics.

In fact, expected spending for this year’s graduated tax amendment campaign is so prolific, it’s on track to break into the list of top 20 most expensive ballot initiatives in U.S. history, said Pete Quist, the group’s research director.

The most expensive ballot initiative on record is California’s Proposition 8 in 2018, which aimed to limit charges for outpatient kidney dialysis and met fierce resistance from pharmaceutical companies. Both sides spent about $135 million on that initiative, Quist said.

All of those dollars flowing in Illinois have underwritten a flood of television commercials, digital ads and campaign mailers across Illinois.

Since 1970, when the current state constitution took effect, the state legislature has put 22 proposed amendments before voters, including this one. Thirteen amendments have won voter support, and eight have failed.

Past support for taxing the wealthy

With Illinois firmly a blue state, polling this year has shown GOP President Donald Trump facing potentially a double-digit loss here. And Pritzker, citing damaging disclosures that the president has avoided paying federal income taxes for years, predicted there could be some spillover effect that could be beneficial for the tax question.

“I would guess people who understand that Donald Trump paid no taxes in 11 out of the last 18 years and that in last two years, he paid $750 each year in taxes, would also understand that we need a fair tax system, and that people who are as wealthy as Donald Trump or as wealthy as those who stand in opposition to the fair tax ought to pay their fair share,” Pritzker said.

Historically, Illinois’ electorate has embraced the concept of having the wealthiest pay higher individual tax rates.

In 2014, voters approved an advisory referendum supporting a 3% tax on millionaires, with proceeds going to education. Nearly 60% of all ballots cast were supportive of the idea, while nearly 64% of those voting on the particular question approved — percentages high enough in both cases to have passed had the question been posed in the form of a constitutional amendment.

The most recent public polling data also have shown support for higher tax rates for the state’s wealthiest citizens.

In early March, the Paul Simon Public Policy Institute at Southern Illinois University in Carbondale found that 65% of those surveyed favored a graduated income tax where tax rates would be lower for lower-income taxpayers and higher for upper-income taxpayers. Thirty-two percent disapproved.

To lose the tax amendment would represent a crippling blow to Pritzker, who has invested so much money and political capital in the issue. The governor has not said whether he intends to seek reelection 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 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 reelection 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.”

Dave McKinney and Tony Arnold cover Illinois politics and government for WBEZ. Follow them on Twitter @davemckinney and @tonyjarnold.