Nearly 170 years ago, Scottish economist John Ramsey McCulloch, who served as editor of the 1828 edition of Adam Smith’s Wealth of Nations, said, “the moment you abandon…the cardinal principle of extracting from all individuals the same proportion of their income…you are at sea without rudder or compass, and there is no amount of injustice and folly you may commit.”
True enough, the graduated income tax amendment, SJRCA 40, before the Legislature does not include rates. Rather, it merely asks the good people of Illinois to bless the notion of a graduated income tax, leaving the details of brackets and rates at the discretion of the Legislature – the very same folks who are possibly on the brink of reneging on the promise that the last tax increase would be temporary, and on the heels of three substantial tax increase proposals in a matter of days recently. But we can look to both other states and the several proposed rate schedules. In 2013, nearly 90% of the states with a graduated income tax levied a top marginal rate on Illinois’ median household income greater than the reduced rate of 3.75% Illinoisans are looking forward to paying next year. In fact, the average top marginal rate amongst the graduated income tax states on Illinois’ median household income was nearly two full percentage points higher, at 5.57%.
Far from being an issue of “fairness,” or of “making the rich pay their fair share,” the graduated income tax rate schedule proposed by Sen. Don Harmon (D-Oak Park) would amount to a tax increase on folks making more than $22,000. What’s fair about middle and low income families paying more? And Sen. Harmon’s is the least progressive of the three proposed graduated rate schedules. The most progressive, an octa-bracket schedule put forth by the Center for Tax and Budget Accountability, would give Illinois one of the highest top marginal rates in the nation, tied with Hawaii and second only to California. Currently, only seven states have eight or more brackets.
It’s not “fair” that Illinoisans are sending more than ever before to Springfield while median household income dropped by 8% between 2003 – 2012, after adjusting for inflation.
As the fifth most populous state, we collect the fourth highest state tax revenue. An October TIME magazine article noted that, in 2011, the combined state & local tax burden was $4,600 per capita. The legislature ought to keep its word and allow tax relief for 100% of taxpayers to take effect, as promised.
We do not agree with Sen. Harmon that it’s a “fictitious comparison” to juxtapose the proposed rate schedules to existing statute. Illinoisans were promised that the 67% tax hike would be temporary. Current law provides that it will begin to recede in less than a year’s time. On January 20, 2011, Sen. Harmon released a “Statement on the Governor’s Revenue Plan” in which he states, “what are we asking of taxpayers? A temporary increase in the individual income tax rate of two percentage points.”
Nor do we agree with other proponents who believe a graduated income tax will “stimulate Illinois’ economy and create new jobs.” It sounds obvious but in order for Illinoisans to have jobs, there first must be jobs to be had and Illinois families are voting with their feet & leaving. In addition to our second-highest unemployment, the nation’s largest moving company, United Van Lines, listed Illinois as the state with the second-highest “outbound migration” for the second-straight year in 2013 – displaced from #1 in 2011 by New Jersey due, at least in part, to Hurricane Sandy and the fact that the Garden State is the only state to levy higher property taxes than Illinois.
Five newspapers, from Chicago to Decatur, have editorialized against the graduated income tax. The Chicago Tribune referred to it as “Tax Hike 2.0.” The suburban Daily Herald noted that it’s “a blatant money grab.” Additionally, a dozen municipalities, from DuPage County to the city of Quincy to Massac County have adopted resolutions opposing this proposal.
Fewer Illinoisans trust their state government than do the citizens of any other state – and rightly so. We believe it’s unfair that, just months before promised tax relief comes to all Illinois taxpayers upon the partial expiration of the historic temporary income tax increase that will have resulted in Illinois citizens and employers sending an additional $31.6 billion to Springfield, now some politicians are telling us that it’s not temporary and that it’s not enough.