Jim Dey: Few specifics are available on progressive tax amendment

Jim Dey: Few specifics are available on progressive tax amendment

Bob Daiber made some news this week. But first things first.

Who the heck is Bob Daiber?

One of a handful of Democrats seeking his party's gubernatorial nomination, he is, to put it kindly, a dark horse.

Nonetheless, Daiber, the regional superintendent of education for Madison County, is a man of substance, even if he lacks the great wealth enjoyed by two of his rivals — billionaire J.B. Pritzker and multi-millionaire Chris Kennedy.

Daiber last week released five years (2012-2016) of state income tax returns. His 2016 return shows an income of $158,113 and that he and his wife paid $5,437 in state income taxes. He did not release his federal tax returns or his federal tax obligations.

His earnings are chump change compared to the huge incomes of Republican Gov. Bruce Rauner and Democrats Kennedy and Pritzker, a point Daiber emphasized.

"This is a true Illinois 1040 tax return, just like ordinary working families throughout the state. It's not muddied up with trusts or holding company dividends," he said.

But Daiber made another announcement that sets him further apart from party rivals.

Like all of his Democratic competitors, Daiber supports a state constitutional amendment allowing the Legislature to replace the current flat state income tax with a progressive income tax that permits higher tax rates on higher levels of income.

If approved by voters, it would be up to legislators to determine what those higher rates would be.

While Daiber's rivals have been coy about their favored rates, he was specific.

Illinoisans currently pay a flat 4.95 percent rate on their income. Daiber would establish five rates, four of which are equal to or lower than the current 4.95 percent rate and one higher.

He proposed levying a 6 percent tax rate on incomes of $1 million or more, a roughly 20 percent increase for that category of income earners.

At the same time, he would levy a 1 percent tax rate on incomes between $2,500 and $24,999, a 2.25 percent rate on incomes from $25,000 to $44,999, a 3.75 percent rate on incomes from $45,000 to $149,999 and a 4.95 percent rate on incomes from $150,000 to $999,999.

But there's a problem with Daiber's tax proposal — it's a bait and switch.

He gives the impression that most people will get a tax cut and only a few — "the millionaires and billionaires" — will get a tax increase.

That won't work because backers of a progressive income tax desperately want billions of dollars more in revenue.

Under Daiber's proposal, the state would generate less revenue than it receives under the current flat tax.

The problem? Illinois doesn't have enough people with annual incomes of $1 million and up.

According to the Illinois Department of Revenue 2013 tax figures, about 32,000 individuals or families out of 6 million tax filers reported annual incomes between $1 million and $25 million. They paid $2.5 billion of the $16.9 billion in income tax revenue that year.

Meanwhile, the Illinois Policy Institute reports that in 2015, just 18 percent of taxpayers earned $100,000-plus. They paid 84 percent of all state income taxes.

A more realistic progressive tax plan was unveiled in 2012 by the Center for Tax and Budget Accountability, which is headed by Ralph Martire. Its backers said their plan would reduce income taxes for 94 percent of taxpayers but generate more than $2 billion in new revenue by increasing taxes on upper-income earners,

For starters, Martire's plan would boost state income taxes on those with incomes of $100,000 to $150,000 to 7.5 percent, an increase of more than 50 percent from the current flat 4.95 percent rate. Rates would increase from 8.5 percent up to 11 percent as income increased from $150,000 to $1 million and above.

Illinois Policy Institute economist Orphe Divoungey contended Daiber's tax-cutting plan is a ruse designed to attract public support for a progressive tax amendment.

"We have seen proposals like this in the past. (The) progressive tax is a trojan horse for middle-class tax hikes and does nothing to stop the state's (fiscal) problems," he said. "While the state continues to spend beyond its means, it's unlikely Illinois lawmakers will pass tax brackets that will result in lower tax revenue."

At the same time, Divoungey said, imposing higher progressive rates on individuals and families earning $100,000 and up would do more harm than good.

"... a progressive tax policy further discourages investment in Illinois. The result would be slow future wage growth and even more out-migration — a blow to the state's economy," he said.

Democrats and Republicans disagree on the progressive income tax. Desperate for more revenue, Democrats enthusiastically favor it. Gov. Rauner is adamantly opposed.

But look for the Democrats, excluding Daiber, to be vague on the question of rates because to be specific would hand Rauner a tax-hike club he would use to beat them with.

Demonstrating that point, Pritzker just released two more television commercials in which he endorsed the amendment without further elaboration.

"Illinois needs to pass a progressive income tax to make the wealthy pay more while protecting the middle class and helping fund our schools," Pritzker said.

Jim Dey, a member of The News-Gazette staff, can be reached by email at jdey@news-gazette.com or by phone at 217-351-5369.

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