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A fair tax: the best option to fix our state’s finances

fair tax

As outlined by Gov. Pritzker in his budget address this year, we have three viable options to fix our state’s finances:

  • Raise taxes by 20% on everyone. In order to raise the needed revenue to pay down our bill backlog, we would have to raise taxes on everyone by 20% within our current flat tax system.

  • Make drastic, 15% across the board cuts to state agencies. If we are not going to raise revenue, we have to cut spending in order to pay down our bill backlog. The kind of cuts necessary to save that kind of money would be devastating to public safety, public education, transportation and social services.

  • Adopt a fair tax that raises taxes on only 3% of Illinoisans – the wealthiest, most prosperous among us. Under Gov. Pritkzer’s proposal, 97% of Illinoisans would either so no change in their tax rate or would see a decrease. Those who make less would be taxes less, and vice versa. Only the top 3% of earners in Illinois would see a modest increase in their tax rate, and we would bring in the revenue necessary to pay our bills.

Why is a fair tax necessary?

  • After years of fiscal instability and with a $3.2 billion budget deficit this year alone, Illinois must act now to shore up our finances.

  • As a state, we can’t keep shortchanging students, undermining universities, decimating social services, watching our roads and bridges crumble.

  • With a flat tax in Illinois, lower-income may pay the same rate as higher-income people, but that amount places a greater burden on them than on those making more. A fair tax with lower rates for lower incomes and higher rates for higher incomes will bring tax relief for working families and produce stable and sustainable revenues in Illinois to get the state on stable financial footing.

    • Taking into account all taxes Illinois families pay, the lowest 20% of income-earners, or those making less than $21,800 a year, pay 14.4% of their income toward taxes. The top 1%, or those earning more than $537,800, pay only 7.4% of their income toward taxes.

    • This makes Illinois one of the most regressive tax states in the country – one of the Institution on Taxation and Economic Policy’s “Terrible Ten” states.

  • A fair tax combats growing income inequality by making sure the wealthy pay their fair share. Over the past decades, nearly all the income growth has been made by the top income levels. Nationally, income inequality is the worst it’s been since 1928 – the year preceding the Great Depression. The current tax system doesn’t allow Illinois to capture that growth because the same rate applies to high- and low-income earners.

How do we implement a fair tax?

  • Currently, the Illinois Constitution prohibits the state from imposing a graduated income tax. In order to change that, three-fifths of both the Senate and the House must pass legislation that would place a question on the November 2020 ballot asking whether voters support a fair tax.

  • In order for the Constitution to be amended, the fair tax must receive support from either 60 percent of those voting on the specific question or a majority of all those casting votes in the election.

  • This means the current legislation (SJRCA 1 – sponsored by Senator Harmon) would not automatically change the Constitution if it passes. It would simply put the question of a fair tax on the ballot, allowing voters to decide.

How do we set the rates?

  • SJRCA 1 does not set a specific tax rate structure; it only deletes the provision in the Constitution prohibiting a graduated income tax.

  • If the amendment is adopted following the process outlined above, the General Assembly may pass legislation setting specific rates.

  • Gov. JB Pritzker has announced proposed rates. These are being discussed with members of the General Assembly as part of ongoing negotiations to introduce legislation setting rates.

Learning about the Fair Tax Plan: