Jim Dey: As tax day draws near, numbers tell real story

Jim Dey: As tax day draws near, numbers tell real story

With income-tax filing day arriving on Tuesday, it's a sure bet there are many procrastinators today sweating bullets over completing this distasteful annual obligation.

Since they're up to the neck in numbers, that's what this column is about — numbers. Specifically, it's about Illinois taxpayers, how much they kick into the till, how much more some government officials want them to pay and the politics that swirls around that dicey issue.

Democratic state Sen. Daniel Biss, who recently announced he's running for governor, helped kick off the debate Friday by disclosing his last five years of tax returns (2012-2016). He reported an adjusted gross income for 2016 of $32,658 for himself, his graduate student wife and their two children.

Biss paid $296 in federal income taxes for 2016 and another $612 in state income taxes. His income was significantly reduced because the state treasurer's office delayed state legislators' paychecks.

But if the delayed payment was bad for the Biss family budget, it's working out splendidly for his political message. His returns show he's not a man of means like two richer Democratic rivals, billionaire J.B. Pritzker and multi-millionaire Chris Kennedy.

Further, his finances are nothing that like of Illinois Gov. Bruce Rauner, who made a fortune in private business before getting elected governor in 2014.

Rauner hasn't released his 2016 tax returns yet, but his 2015 filing shows he and his wife had an adjusted gross income of $187.6 million. They paid $43.3 million in federal income tax and another $6.9 million in state income tax.

Rauner, who is not taking a salary as governor, also gave away millions of dollars through his charitable foundation.

Given those numbers, the contrast between Biss and Kennedy, Pritzer and Rauner could hardly be better for the state senator from Evanston.

It fits right into his campaign theme of going after the "millionaires and billionaires" whom he contends are improperly paying too little in taxes.

It's easy to rail against nameless "millionaires and billionaires."

But who are they? How many are there? What are their incomes?

It's complicated right off the top because the phrase "millionaires and billionaires" refers to their total assets, not their annual taxable incomes. Further, while there are, in numerical terms, many Illinoisans with vast assets — Sam Zell, $5 billion; William Wrigley Jr., $2.8 billion; Michael Jordan, $1.3 billion — they reflect a tiny percentage of the overall population.

So the question is: How many of the "millionaires and billionaires" are there to tax? How much should they be taxed, and, most importantly, would soaking them raise enough revenue to solve Illinois' woeful financial problems?

It's routinely argued that there just aren't enough rich people to generate the kind of income Illinois needs, and that is why any tax hikes must inevitably be aimed at middle-income earners.

Numbers provided from the 2013 tax year, the most recent year the figures are available, by the Illinois Department of Revenue speak to the issue.

Illinois had slightly more than 6 million taxpayers in 2013. They reported a collective income of $542.2 billion and paid $16.9 billion in state income tax.

No one reported an income of more than $1 billion. About 32,000 reported incomes ranging from over $1 million to $25 million or more, and they paid about $2.5 billion of the $16.9 billion in state income tax revenue.

Democratic House Speaker Michael Madigan has publicly proposed a special levy on those with $1 million or more annual incomes.

He hasn't mentioned specific numbers, preferring to use the issue as a club to beat up Republicans who oppose it. But while doubling state income taxes paid by the 32,000 who fit that category would generate substantial additional revenue (from $2.5 billion to $5 billion) the increase wouldn't be enough to eliminate the deficit in the multibillion-dollar deficit budget Madigan sent to Rauner for the 2015-16 fiscal year.

Further, Madigan's millionaire's tax as well as a progressive income tax, rather than the current flat tax, would require the passage of an amendment to the Illinois Constitution that requires an extraordinary majority vote to become effective.

Illinois, of course, has other high-income earners. Another roughly 75,000 taxpayers reported incomes of $400,000 up to $1 million, and they paid about $1.6 billion in state income taxes.

So roughly 105,000 taxpayers earning from $400,000 to more than $25 million paid roughly $4 billion of the $16.9 billion in state income tax — about 23 percent.

Compared those numbers to the tax categories where the real money is — from $50,000 to $200,000.

About 2.2 million Illinois taxpayers fell within those categories, paying nearly $8 billion in state income taxes, nearly half of the revenues generated.

Candidates can talk all they want about targeting the super-rich — the "millionaire and billionaires" — and they can extract substantial sums from them, but not enough.

In the end, revenue-hungry legislators have no choice but to target middle-income earners for the same reason Willie Sutton robbed banks: that's where the money is.

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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David Green wrote on April 16, 2017 at 11:04 am

Dey's analysis is ultimately either misguided or dishonest. The top 10% make 45% of the income, at least $250 billion. Given the already regressive nature of state/local taxes, it would be fair and reasonable to get another 10%, $25 billion, from these 600,000 households alone--even half of that would be adequate to address the deficit. But ironically in light of Dey's assumptions, it's the middle class (the next 40%) who would be willing to pay more, rather than the top 10%, or the top 1%, who make 20% of the income, most of which is not by labor but by investments (rents). But Dey represents those moneyed interests, whether he consciously understands that or not. Otherwise he would be out of work himself.

LocalResident wrote on April 19, 2017 at 1:04 am

This has some interesting perspective and seems to be the source of some the data in the article:  http://www.revenue.state.il.us/AboutIdor/TaxStats/2013/IIT-AGI-2013-Fina... The split points are different, so I'm curious whether there's another source.

Non-Illinois residents have a huge portion of adjusted gross income (AGI) at 29.5% yet only have 7% of net income.  One possible explanation is that non-Illinois citizens have most of their income excluded from Illinois taxation because it was earned elsewhere.

This changes the situation substantially.  There is $339.9 billion net income for Illinois to tax after adjustments for personal deductions, people over 65, being blind, and probably other assorted things.  Finding another $250 billion to tax at 10% as was suggested would likely dip way into people in the $50-100k income range.  Illinois residents with $100,000+ income have $195.3 billion of net income, and residents with incomes over $50,000 have $265.7 billion total net income. 

Tapping the top $250 billion with an extra tax is impossible without hitting lots of housholds making maybe $60,000 and up.  This hits lots of "real people" like teachers, nurses, firefighters, etc. who do not consider themselves "rich".  Increasing their rate by another 10% would be devastating and give Illinois by far the highest tax rate in the nation and apply it at far lower salaries than anywhere else.  That would be 13.75% on all income for people making $60,000+.  That's going to generate some huge second order effects like a whole lot of people moving and make things rough on pass-through businesses that report business accounts via the individual income tax returns of the owners.

Incidentally, the results are not much different if you use AGI instead of net income once you exclude the huge chunk of untaxable income credited to non-Illinois residents.  Thus, it's not a case rich people using special tricks to hide their income.  You just can't find $250 billion to tax without hitting the middle class hard.