Legislator at war with tax facts

Legislator at war with tax facts

Illinois legislators who want more money to spend need to be honest about what a graduated income tax system could cost the taxpayers.

State Rep. Naomi Jakobsson recently replaced her makeup with war paint as she declared class war against those who do not share her enthusiasm for adopting a graduated income tax for Illinois.

Jakobsson, an Urbana Democrat, specifically targeted the Illinois Policy Institute, a think tank, with making arguments that contained "empty rhetoric interspersed with outright lies" and spreading these "diatribes" throughout the state. Jakobsson said the IPI, acting against "all reason and evidence," is opposed to the plan because it is a "hired mouthpiece" for wealthy "anonymous" donors intent on making "dishonest attacks against those, like me, who are working for a fairer tax system."

"The biggest lie is that the proponents of the Fair Tax Amendment are proposing an income tax schedule that would raise taxes on most Illinois taxpayers," she said.

It would be unfair and inaccurate to accuse Jakobsson, as she does others, of misrepresenting the facts. But in not precisely stating the issue, she is shading them.

Critics of the graduated income tax plan are not specifically charging that proponents have presented a tax plan that would raise taxes on most Illinois taxpayers. What they argue is that, if a graduated plan is adopted, state legislators could raise taxes on most taxpayers and, if they follow the pattern set by other states with graduated tax systems, they will do so.

This is a complicated issue that, so far, is dominated by generalities. By suggesting that this vague plan is governed by her specifics, it's Jakobsson who's being disingenuous.

Here are the basics. The Illinois Constitution mandates a flat income tax, now set at 5 percent. Jakobsson and others are proposing that voters approve a graduated tax system, meaning that tax rates would increase as income goes up.

Assuming the General Assembly approves a plan to put the issue on the November 2014 ballot, voters would be asked to approve the concept. Specific tax rates would only then be set by the governor and legislators.

So when Jakobsson states that her plan would lower tax rates on most people but raise them on the rich, it expresses nothing beyond her personal desire. She is one of 118 members of the Illinois House, all of whom could propose a different set of tax rates.

Her plan calls for taxing income up to $18,000 at a year at 3 percent, income between $18,000 and $58,000 a year at 4.1 percent and income between $58,000 and $106,000 a year at 5 percent. Her highest rates would be 7.2 percent for incomes above $500,000 and 8 percent for incomes in excess of $1 million.

Ralph Martire of the Center for Tax and Budget Accountability, a think tank with the same tax status as the Illinois Policy Institute that Jakobsson so disdains, has another plan. Martire's group proposed higher rates on lower levels of income than Jakobsson. He would set rates at 5 percent for income between $7,000 and $100,000, 7.5 percent for incomes between $100,000 and $150,000, 8.5 percent for incomes between $150,000 and $200,000, 9.5 percent for incomes between $200,000 and $300,000, 10.5 percent for incomes between $500,000 and $1 million and 11 percent for incomes above $1 million.

These numbers are meaningless until legislators actually adopt the rates they want.

What rates would revenue-hungry members of the Illinois House and Senate approve? It's impossible to predict. But one guide is what legislators have done in other states that have a graduated income tax.

Missouri has 10 different rates, the highest being 6 percent on incomes in excess of $9,000. Iowa has nine rates, the highest being 8.98 percent on family income in excess of $63,000. Wisconsin has five rates, the highest being 7.75 percent. But it taxes incomes between $14,090 and $28,180 at 6.15 percent and incomes between $28,181 and $211,330 at 6.5 percent.

Those are all dramatically higher than Illinois' current flat rate and just a few of the many examples of the high graduated rates that other states impose on low levels of income.

Jakobsson can't honestly guarantee that wouldn't happen in Illinois because she will have little influence over the legislative process. In fact, she won't even be in Springfield to act on the plan because she's announced she's retiring at the end of her current term.

Her spirited declaration of war aside, Jakobsson's case for a graduated income tax is undermined by a collection of facts that, in her mind, only constitute a dishonest diatribe.

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EdRyan wrote on October 13, 2013 at 8:10 am

We could raise revenue by making Illinois more friendly to sole proprietors and small business corporations that employ five or fewer people.  The type of business that generates most of the jobs.    The unemployment tax in Illinois applies to twice as much in base wages as other states and the cost of worker compensation insurance is worse.  The owner can't pay off politicians in order to get the great deals like ADM is in line to get.