Jim Dey | Details aside, Pritzker's tax plan will appeal to many

Jim Dey | Details aside, Pritzker's tax plan will appeal to many

Good salesmen recognize an effective pitch when they see one. That's why Illinois voters should be prepared to hear the following statement repeated ad nauseam between today and November 2020.

"Under my fair tax plan, 97 percent of taxpayers get tax relief, and the wealthy will pay their fair share."

So says Illinois Gov. J.B. Pritzker, who's hawking an amendment to the Illinois Constitution that would repeal the current flat income tax and replace it with a progressive plan that would allow legislators to apply rising rates to rising levels of income.

The governor last week revealed the kind of rates he says he'd like to see legislators approve in legislation that is separate from the amendment.

Pritzker, a Democrat who took office in January, has the political advantage of being correct in his characterization of the proposal.

But a close look at the details reveals the governor's much-touted tax cut for the 97 percent isn't much of a tax cut, while his proposed income tax increase on the 3 percent — those making more than $250,000 a year — is substantial, roughly 60 percent.

But the numbers, while perhaps crucial to putting together a winning campaign message, are mostly irrelevant to the real issue — whether the governor and legislators should be given the authority to fiddle with tax rates and income categories in perpetuity.

That's what the Nov. 3, 2020, vote is all about.

Here's one reason why that is undeniably true.

Pritzker estimates that his tax plan will generate $3.4 billion in new revenue.

He also contends that passage of the progressive tax amendment will "change the arc of Illinois finances forever."

But two public policy organizations — Wirepoints and the Illinois Policy Institute — challenged Pritzker's claims.

For starters, Wirepoints' analyst Mark Glennon contends that $3.4 billion in new revenue is mere pocket change in the context of Illinois' many, many billions in debts and Pritzker's ambitious social spending plans.

"Assume he is correct that his new tax rates will raise $3.4 billion more for the state. That's all you need to see that his central promise to Illinois has been a hoax. Contrary to his persistent claims that a progressive income tax is Illinois' ticket to salvation, $3.4 billion isn't remotely close to solving Illinois' fiscal crisis, much less funding all the other promises he has made," Glennon wrote.

He estimates "the total cost of stabilizing the state and funding Pritzker's promises has ranged from $10.7 billion to $19 billion."

IPI, a free-market think tank, doubled-down on Glennon's assertion that $3.4 billion in new revenue won't be enough by arguing that Pritzker's plan won't produce $3.4 billion.

IPI said "there's no publicly available data to back up Pritzker's claim that his rates are capable of generating $3.4 billion in revenue" and that, according to IRS statistics, "these rates would generate far less revenue ($1 billion to $2 billion less)."

IPI estimates that "revenue from these proposed rates would bring in only $1.4 billion, according to dynamic estimates, or $2.4 billion, according to static estimates."

Orphe Divounguy, IPI's chief economist contends "there is no possible way Gov. Pritzker can fulfill all of his spending promises, pay down billions in debt and still cut taxes for 97 percent of Illinoisans, as his proposal states."

"He can't even raise the amount of revenue he claims this proposal does," said Divounguy.

It's statements like those that fuel amendment critics' arguments that it's the power to change tax rates willy nilly rather than putting Pritzker's proposed tax rates in place that really motivates progressive tax plan proponents.

Here's the chief reason why they make that argument — most taxpayers fall into the middle class and the state can't afford not to rely on them for revenue. That's where the money is, and that's why Pritzker's proposed tax cuts for those taxpayers are so small.

Pritzker's office released figures showing 27.2 percent of taxpayers earn $10,000 or less, 58.9 percent earn between $10,001 and $100,0000 and 11.1 percent earn between $100,001 and $250,000.

Those earning between $100,001 and $250,000 will continue to pay the current 4.95 rate under Priztker's graduated tax plan. Taxpayers in the lowest and second-lowest income categories would receive rate cuts of .2 percent and .05 percent, respectively.

Pritzker also proposed two other small cuts that have nothing to do with tax rates. There is a modest 20 percent increase in property tax credits and a $100 per child tax credit.

At the same time, tax rates on the next three categories would jump from 4.95 percent to 7.75 percent ($250,0001 to $500,000), to 7.85 percent ($500,001 to $1 million) and 7.95 percent (over $1 million).

The increase of nearly 3 percentage points reflects a jump in taxes owed of nearly 60 percent.

Of course, if the amendment passes and Pritzer's proposed rates do not produce sufficient revenue, he and legislators could — and certainly would — boost the rates and change income categories to meet their revenue goals.

Pritzker argues that kind of flexibility is necessary for effective governance. But his position bolsters critics' claims that he's asking voters to sign a "blank check" progressive tax plan.

Jim Dey, a member of The News-Gazette staff, can be reached at jdey@news-gazette.com.

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