Tax amendment a complicated proposition

Proponents say flat tax is more fair, opponents worry legislators will raise everyone’s taxes

Series: Decision 2020 | Story 4

The division over the tax amendment to the state constitution Illinois voters will see on the Tuesday, Nov. 3, ballot is evident from the way supporters and opponents refer to the proposal.

Supporters of the amendment, which is expected to bring in $3.4 billion a year, call it the “Fair Tax” proposal.

The proposed progressive tax will address the inequity in the tax burden, said Kim Savage of Darien, chairman of the Downers Grove Township Democratic Organization. At the lowest income levels, people pay 12 to 14 percent of their income in taxes, she said, while the wealthiest pay only 7 percent.

She believes a progressive tax will help small businesses and families and change an outdated tax structure.

“I think that it’s really important because we need to bring our tax systems up to date to ones used by the majority of states and the federal government,” she said.

She noted that some people are hearing the amendment will mean a tax on retirement income.

“That is not the case,” she said. “Retirement income will not be taxable under this plan.”

The additional revenue is needed to help address the state’s deficit and put the state on the path of fiscal sustainability, she said.

“If it doesn’t pass, everybody’s taxes will go up, probably about 1 to 2 percent to help close the gap and then you will probably also start seeing the service taxes on things like haircuts, laundry, dry cleaning, which we don’t have now but most of our surrounding states do,” said Savage, who is also co-president of Illinois Democratic Women.

“I just think this is the fairest way to deal with the tax situation,” she added.

Those who oppose the amendment — including John Hakim of Hinsdale — refer to it as the “Tax Hike” proposal.

“The tax amendment has been peddled as the ‘Fair Tax,’ but it is anything but that,” said Hakim, an area chairman of the Downers Grove Township Republican Organization.

Proponents focus on the government’s ability to set higher tax rates for higher wage earners, he noted.

“However, the amendment would actually allow the state to impose whatever rates seem ‘appropriate’ on any individuals, and there is research that shows that in many states that use the progressive tax system, lower and middle wage earners are paying a higher tax rate than Illinois wage earners currently pay,” he said.

New rates for Illinois were approved by legislators in 2019 when they passed Senate Bill 687. The six new income tax brackets, which will go into effect Jan. 1 if the amendment passes, lower taxes .2 percent on the lowest income groups while raising taxes more than 3 percent on the highest income group.

The graduated tax rates that were approved are

• $0-$10,000: 4.75 percent

• $10,000-$100,000: 4.90 percent

• $100,001-$250,000: 4.95 percent

• $250,001-$350,000: 7.75 percent

• $350,001-$750,000: 7.85 percent

• $750,001+: 7.99 percent

Married couples making more than $250,000 also would see a tax rate increase, as would corporations.

Taxes on corporations currently are capped in relation to the rate paid by individuals, Hakim noted.

“When the individual rate is altered, then the business entities would be paying a proportionately higher rate,” he said. “Higher corporate taxes will lead to a flight of business from Illinois.”

He also fears what will happen if the amendment passes and individuals also relocate to other states with lower or zero tax rates.

“Lower wage earners who remain in Illinois then will have to shoulder the tax burden in Illinois,” he said.

Finally, he does not trust legislators to use the proceeds wisely.

“I am generally against any kind of tax increase, especially in an instance like the state of Illinois, which has done little to responsibly manage its finances,” he said.

Early voting is currently open. See Page 6 for more information.

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Pamela Lannom is editor of The Hinsdalean