As the election approaches, Illinois residents have probably seen countless ads telling voters to either vote yes for the “fair tax” or no on the “tax hike.” Both ads, although from different sides of the aisle, are referring to a controversial proposed amendment to the state’s constitution.
Senate Bill 687, which pushed for a graduated income tax, known as the “fair tax,” was signed by Governor J.B. Pritzker back in June 2019. However, Illinoisans will decide Nov. 3 if they support giving the state the power to impose a graduated income tax — a system in which people’s tax rates are based on their income. Under this system, higher income means higher tax rates and lower income means lower tax rates. The federal government uses a graduated income tax.
The Illinois Constitution, under Article IX Sec. 3, establishes a flat income tax. Currently, the flat tax rate on income is at 4.95 percent — meaning all Illinoisans pay this, regardless if they make $12,000 or $12 million. Only nine states, including Illinois, have a flat income tax rate, according to the Tax Policy Center. In contrast, a progressive or “fair tax” means people will contribute based on their income.
Of the 1,000 respondents in a poll conducted by the Paul Simon Public Policy Institute, 65 percent of people supported amending the constitution “to allow a graduated income tax.”
The Yes Side
Leading up to Election Day, the proposed amendment has been engulfed in a major political showdown throughout the state. A recent ad by the conservative Illinois Rising Action accuses Pritzker of being a “master of avoiding taxes.”
Overall, supporters of the proposed amendment believe it will create a more equitable tax system in Illinois by taxing the state’s wealthiest while benefiting the lower and middle class and small businesses.
Early on in his campaign and during the Illinois gubernatorial election, Pritzker made the fair tax a central component of his platform and is an outspoken proponent of the amendment. The governor himself has given $51.5 million to the Vote Yes For Fairness committee, the Associated Press reported. Quentin Fulks, who leads the committee, was deputy campaign manager for Pritzker.
In a July 8 tweet, Illinois Senator Dick Durbin came out in support of a “fair tax.” Other groups in support of the proposed amendment include the League of Women Voters of Illinois, Illinois American Federation of Labor and Congress of Industrial Organizations, Chicago Teachers Union and more, according to the Vote Yes for Fair Tax committee.
The No Side
Opponents of the proposed amendment have been equally as vocal in their disdain for a “fair tax” and changing the current system.
Some of those against the proposed amendment believe it will be a slippery slope, where politicians will have unyielding power to increase taxes on any bracket they want. They also claim it will hand Springfield a “blank check” for spending, push people out of Illinois and lead to job loss, according to The Coalition to Stop the Proposed Tax Hike Amendment. Finally, some criticize its timing, since many businesses have been impacted by COVID-19.
Something important to point out is that under the proposal, there’s no mention of a retirement income tax. However, critics argue it “will pave the way for a tax on retirement income.”
Ken Griffin — the wealthiest Illinoisan with a $15 billion net worth, according to Forbes, and someone who’s given millions to super PACs over the years — criticized Pritzker and Illinois Speaker of the House Mike Madigan over the progressive income tax proposal in a Sept. 4 op-ed for the Chicago Tribune.
What would a “fair tax” look like for Illinoisans?
In 2019, the state’s median household income was $69,187. Going off that number, if an Illinoisan were to make $60,000 per year, they would likely see a decrease in their income tax rate under a progressive system.
However, the tax breaks for individuals making $100,000 or less would be a “modest drop,” said Professor Anne-Marie Rhodes, who teaches about income tax at Loyola’s School of Law.
For instance, the lowest bracket ($10,000 and under) would only experience a 0.20% decrease. Rates for taxpayers who make $100,0001 to $250,000 would remain the same. Once above $250,000, Illinoisans should expect a dramatic, but gradual, increase in rates. The highest earners, anyone who makes over $750,000, would be taxed at a rate of 7.99% — a 3.04% increase.
Rhodes said she thinks the main concern for those who oppose the legislation is it “gives authority to the legislature to set different tax rates,” meaning the rates voters agree to now may not be the same in the future.
So, where do Loyola students fit into the picture?
The short answer is individual students, excluding joint incomes, will most likely not be heavily impacted by the “fair tax” under the proposed plan because it largely applies to those making more than $250,000 and in higher-income tax brackets.
On average and depending on their field, a 2019 college graduate’s starting salary is $53,889, according to the National Association of Colleges and Employers. Keeping in line with this number and considering Chicago’s average property tax bill, the Fair Tax Calculator projects a single college graduate with no dependents could expect to save $86.