Taxation is first order of business for state legislators

Taxation is first order of business for state legislators

With the General Assembly back in session, the subject of taxation stands near the top of its agenda.

Actually, there are two tax issues, and, this being an election year, a schizophrenic attitude surrounds both — hurry up on one and wait-a-minute on the other.

First, there is a proposal to amend the Illinois Constitution to allow replacement of the state's flat income tax rate with a progressive income tax. Then, there is a separate-but-related issue of the 2011 lame-duck Legislature's decision to increase the state's individual income tax by 67 percent, from 3 percent to 5 percent. Part of the increase — 1.25 percent — is supposed to be temporary, and it's scheduled to expire on Jan. 1, 2015, causing the current rate to fall from 5 percent to 3.75 percent.

If majority Democrats can get the progressive income tax proposal on the ballot, they won't have to worry about reneging on their promise to allow the temporary tax to expire. If they can get the progressive-tax issue on the ballot but it doesn't pass, they'll have to either extend the temporary tax hike or allow it to expire and forego an estimated $1.6 billion in revenue.

The issues are on a dual schedule.

There's a May 4 legal deadline to put the progressive-tax proposal on the fall ballot. If that effort fails, legislators can be expected to wait for another post-election lame-duck session to deal with extending the temporary tax increase.

Further complicating the issues is the political atmosphere in which they'll play out. Republicans say they are united against the progressive-tax amendment, meaning that Democrats will have to provide the three-fifths vote needed to pass it in the Illinois House and Senate.

How does it look?

"The prospects for passing (the progressive-tax amendment) in the Senate are greater than they are in the House," said Republican state Sen. Matt Murphy of Palatine.

Local Democratic state Rep. Naomi Jakobsson of Urbana, who is sponsoring the progressive tax amendment, said it's an "uphill battle" to pass it.

"There's a lot of work to be done," said Jakobsson, who agreed with Murphy that the proposal will be easier to pass in the Senate than the House.

Because they have such an overwhelming majority in both houses, Democrats can pass anything they want. The question is whether they want to put the progressive-tax amendment on the ballot and force their party's candidates to defend the inevitable tax increase it would bring.

In the Senate, Democrats outnumber Republicans by 40-19. Because the amendment needs 36 votes to pass by a three-fifths majority, Senate Democrats have room to maneuver.

But it's different in the House, where Democrats outnumber Republicans 71-47.

Every Democrat would have to vote aye to create the necessary three-fifths majority, and one Democrat already has said he's a sure no vote.

"I won't be voting for it," said state Rep. Jack Frank, a Marengo Democrat. "I can't in good conscience ask the taxpayers to pay more."

Jakobsson acknowledged Frank's position but said she's hoping that she can change his mind.

"I do need to sit down with him and listen to his concerns," she said.

Crucial to Jakobsson's argument is her contention that a majority of taxpayers would pay less than they do now while only upper-income earners will pay more. She said that "people are being misled" by opponents of the measure, particularly the Illinois Policy Institute.

Jakobsson might have a tough sell on her hands where Franks is concerned. He indicated his feet are in concrete on this issue. But Murphy said he's seen legislators extricate themselves from firm commitments before.

"If (House Speaker) Madigan puts the screws to his guys, I think he can probably pass it," he said.

Although Madigan's opinion on the issue is unknown, the progressive-tax proposal has high-level backers, including Gov. Pat Quinn and Senate President John Cullerton.

Under a progressive plan, tax rates go up as income goes up. Jakobsson has argued that higher-income people do not pay their fair share of state income taxes and that imposing higher rates as income goes up is a more equitable approach.

How much rates would go up and on whom is unknown because there are no specific numbers associated with the progressive-tax plan. The Legislature would approve multiple rates only after the proposal to amend the constitution is adopted.

Republicans, however, argue that statistics show that under the current flat rate higher income earners pay the lion's share of state income taxes.

Statistics from the Illinois Department of Revenue back them up.

In the 2011 tax year, according to the Revenue Department, those in the $100,000-plus income category made up 11.8 percent of taxpayers and paid 54.2 percent of income tax revenues. At the same time, those earning $50,000 or less made up 69.8 percent of the taxpayers and paid 21.3 percent of tax revenues.

So it's really a question of whether upper-income earners will continue to pay disproportionately more than their numbers represent or even more.

As to the various rates on increasing income, proposals put forth by Jakobsson and the Illinois-based Center for Tax and Budget Accountability both call for rates higher than the 3.75 percent number scheduled to take effect on Jan. 1, 2015.

The CBTA plan calls for 5 percent rates on income from $5,000 to $100,000 and rates escalating from 7.5 percent to 11 percent on incomes between $100,000 and $1 million-plus.

The Jakobsson plan calls for levying a 4 percent rate on incomes between $18,000 and $36,000 and 5 percent on incomes from $36,000 to $58,000.

Starting at the $58,000 income level, taxpayers would see rates higher than the current 5 percent, starting at 6 percent and escalating to 9 percent. Income earners above $95,000 would see tax increases ranging from 40 poercent to 80 percent above what they pay now.

Jakobsson's plan, of course, is strictly theoretical. Because she's not running for re-election, Jakobsson won't be in Springfield to push her proposal.

The tax issue is not the only tough issue legislators must confront.

They are in the beginning stages of putting together a new budget for the fiscal year that begins July 1, and Senate President Cullerton says they face a potential $3 billion gap between proposed spending and estimated revenues.

Jim Dey, who is The News-Gazette's opinions editor, can be reached by email at or at 351-5369.

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bmwest wrote on February 23, 2014 at 3:02 pm
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===those in the $100,000-plus income category made up 11.8 percent of taxpayers and paid 54.2 percent of income tax revenues.===

Do you know what percentage of income they represent, though? The above information doesn't allow one to assess the current state tax rate's "fairness". A comparison of the percentage of income they earned and taxes they paid would be more useful to show who bears the greater burden as a percentage of income. Even better would be to calculate it based on disposable income, perhaps defined as 150% of the poverty threshold.