THE PROGRESSIVE INCOME TAX THROUGHOUT ILLINOIS HISTORY
For over a hundred years, the state of Illinois derived its revenue principally from a general property tax. Broadened over time to include property other than land (e.g., carriages in 1819 and watches in 1827), this method continued under the second Illinois Constitution, ratified in 1848. This document gave the state the additional authority to tax certain occupations (specifically listed were, among others, “hawkers,” “showmen,” and “jugglers”). These same limitations were maintained under the Constitution of 1870, but with an added provision that all such taxes be “uniform as to the class upon which it operates.”
According to an early twentieth-century history of Illinois taxation, “During the first two years as a state, money was paid out of the treasury to the amount of $52,809.70. There was also a cash balance left in the treasury, on January 1, 1821, of $17,720.13. This would seem to indicate that for two years the entire receipts at the treasury, almost all of which probably came from taxation, were $70,529.83.” That amount is roughly equivalent to $1.5 billion today. In comparison, General Fund revenue has equaled nearly $70 billion in the past two years. The general property tax remained the largest source of state revenue until its elimination in 1932.
The people of Illinois have, on three occasions, voiced their opinion on the progressive tax and on each occasion Illinoisans sounded a resounding “NO.” On December 12, 1922, the Fifth Illinois Constitutional Convention submitted a proposed document to the people for ratification which included a provision for an income tax. Article VII §143 stated, “A general income tax may be imposed upon all net incomes. If such income tax is graduated and progressive the highest rate shall not exceed three times the lowest rate.”
When the votes were counted, the people had roundly rejected the proposed constitution by a vote of 921,398 to 185,298. The front page of the Chicago Daily Tribune the next morning proclaimed, “City & State Wallop Constitution,” noting that “[i]n many precincts ratification got only a goose egg.” At the time, Dr. Walter F. Dodd, a political science professor at the University of Chicago and preeminent authority on state constitutions, stated, “It is probable that fear of increased taxation was the chief influence producing the heavy vote for opposition.” And this rejection occurred during the height of the Progressive Era. Other subsequent statewide referenda to amend the Constitution, in 1926 and 1930, included, or at a minimum allowed for the creation of, a progressive income tax. Both failed, and would have under the current, less rigorous Constitutional amending mechanism.
In 1932, the 57th General Assembly met in special session to pass a graduated income tax which Governor Louis L. Emmerson (R) signed into law. Far from having a consensus, House passage was by a one-vote margin. The law created six brackets ranging from a 1% tax on net income less than $1,000 (more than $17,000 today) to a 6% tax levied on net income greater than $25,000 (the equivalent of roughly $425,000 today). Later that same year, in the case of Bachrach vs. Nelson, the Illinois Supreme Court struck down the law as unconstitutional due to its progressive nature which, the Court stated, violated the Constitutional requirement of uniformity. That same year, the Legislature abolished the general property tax and the following year enacted a statewide sales tax which remained the largest source of state revenue until 1969. In that year, the Legislature voted for the enactment of a flat income tax which levied separate, but uniform, rates on individuals (2 ½%) and corporations (4%). Governor Richard Ogilvie (R) signed the new income tax into law. Within weeks, the constitutionality of the tax was challenged and upheld by the Illinois Supreme Court. “As we have heretofore indicated, individuals and corporations may bear different classifications so long as the classifications are reasonable and consistent with the rule of uniformity,” stated the Court.
After voters at the 1968 general election approved the call for a constitutional convention, our state’s sixth, delegates discussed the differences and merits of both flat and progressive income tax schemes. Interestingly, an amendment which sought to place a 5% maximum rate on the personal income tax received seven more votes than an amendment which sought to eliminate any restrictions on the income tax. However, both failed. At another juncture with the issue on the floor, Delegate Dwight P. Friedrich (who had previously served in the Illinois House and would later serve in the state Senate) stated, “I can tell you now that if you give the legislature the power to have an unlimited tax you’re going to get an unlimited tax – believe me, unlimited.” The Majority Proposal to emerge from the Revenue Committee of the Convention recommended the adoption of a flat income tax in the revenue article.
 Under the Illinois Constitution of 1870, an amendment required the assent of a majority voting at that election in order to pass. Under the current Constitution, passage of an amendment requires either that or 3/5ths of those voting on the question. In 1926, the Revenue Amendment received the approbation of 58% of those voting on the question & the 1930 version received a mere 42%.