Listen to this article

One of the latest ads from Illinois’ progressive-tax proponents deserves a fact check. Here’s their video: https://www.facebook.com/104919517531062/videos/3079797422131585

The ad from Vote Yes for Fairness says, correctly, that middle-income workers in Wisconsin and Iowa pay lower tax rates than millionaires. From there, it jumps to a claim that Illinois has “one of the most unfair tax systems in America” because everyone in Illinois pays the same rate of 4.95 percent. It also claims that Illinois is “one of the only states where everyone is forced to pay the same tax rate.”

Both those claims are false. The ad cherry-picks Iowa and Wisconsin as examples, ignoring that Illinois’ other neighbors all have flat or near-flat tax rates. In total, the U.S. has nine states with flat tax rates and another nine that don’t tax income at all. That makes 18 states that tax everyone at the same rate.

The ad also ignores another 18 progressive-tax states that tax both middle-income earners and millionaires at the same marginal rates.

The other big claim in the ad is that 97 percent of Illinoisans will pay the same or less under new rates passed by the Legislature. That may or may not be true initially, but it certainly won’t be in the future.

Here are the facts about Illinois’ supposed “most unfair tax system”:

1. Illinois is nearly surrounded by flat tax, or near-flat tax, states. All Michiganders pay 4.25 percent. The same goes for residents in Indiana, which has a rate of 3.23 percent. Kentuckians, too, pay a flat rate of 5 percent.

And Missouri’s progressive tax structure is essentially flat, taxing all income above $8,424 at 5.4 percent.

2. Colorado, Massachusetts, North Carolina, Pennsylvania and Utah also have flat-tax schemes. Again, in those states, everyone pays the same rate.

3. Then there are the nine zero-income-tax states. Alaska, Florida, Nevada, Tennessee, Texas, New Hampshire, South Dakota, Washington and Wyoming don’t tax working income. (Tennessee and New Hampshire do tax investment income.)

In all, 18 states tax low-, middle- and wealthier-income taxpayers at the same rate. But there are even more that do so when you consider many have nearly flat progressive tax structures.

4. Many “progressive tax” states tax low- to middle-income workers at the same marginal rate as millionaires.

Eighteen of them, in fact. For example, Georgia taxes all income above $7,000 at 5.75 percent. Idaho’s top rate is 6.93 percent on all income greater than $11,554.

The reality is, Illinois is far from “one of the only states” to treat low- to middle-income workers the same as millionaires.

5. Many progressive-tax states hit the middle class harder than Illinois does now. Almost all of their top tax rates are higher than Illinois’ current rate of 4.95 percent, before

accounting for exemptions and deductions. Nebraska’s top rate is

6.84 percent on income over $31,160. That’s certainly not “millionaire” levels. Nor is it in Iowa, where the maximum rate is 8.53 percent on income over $73,710. In the whole group, only New Mexico has a top rate lower than Illinois’ current flat tax.

6. The state’s deficits, pension costs, unpaid bills and expenses will cause politicians to raise rates on middle-income residents. Lawmakers have never presented detailed numbers proving the claim that 97 percent of residents will pay the same or less, nor that their rates can raise the amount of revenue they project, especially now, considering the economic impact of COVID-19.

The proposed rates are projected to bring in $3.6 billion in new revenue, far short of what’s necessary, absent reforms, to cover Illinois’ structural deficits and unpaid bills, the true costs of its public-pension plans, and more.

Add up those costs, and politicians need to raise $10 billion in new revenues annually. Wirepoints calculated new rates based on those needs and found that they would grow to 9 percent on middle-income residents and more than 11 percent on the wealthy.

And then there’s the billions in new spending that proponents have promised the new tax will pay for, including for K-12 education and property-tax relief.

To raise $15 billion a year, those rates would have to double for the middle class and nearly triple for those making more than $1 million.

The reason is simple: Middle- and lower-income taxpayers make a majority of the income in Illinois. Two-thirds of Illinois’ taxable income comes from residents who make $250,000 or less. If lawmakers don’t want to pass reforms, they’ll have to go after middle-income residents.

Ted Dabrowski and John Klingner are analysts for Wirepoints.com, a website devoted to research and commentary about Illinois’ economy and government.