The Illinois income tax is currently at the flat rate of 3.75 percent, regardless of how much an individual makes per year. But that could change, thanks to a bill that's advancing in Springfield. It would move Illinois to a graduated income tax system, where higher earners pay higher rates than lower earners, like they do on federal taxes. But will it become law? That could be tricky.
The bill passed out of a House committee Tuesday which would indicate that House Speaker Michael Madigan is behind it, at least for now. There’s also a similar proposal in the Senate.
Proponents call it the “fair tax.” It purports to lower taxes on 99 percent of filers and raise $1.9 billion in revenue.
It would set four different tax brackets levels based on income:
But there is one giant hurdle.
“The constitution specifically says Illinois cannot have a graduated income tax,” said election lawyer Michael Dorf. “So the constitution would have to be amended. To do that requires three-fifth of the House and the Senate [to approve it], and the amendment has to be passed at least six months before the election if they want it on the ballot. So, May 8 would be the deadline for a Nov. 8 election.”
There is a separate measure to amend the constitution that will be heard in a House committee on Thursday. A similar measure in the Senate passed late Tuesday afternoon.
If it passes the full General Assembly, it goes on the ballot in November and a majority of the public has to vote it up or down.
There is another quandary: The General Assembly can only put three constitutional amendments on the ballot. There are more than three proposals–including an effort to abolish the lieutenant governor’s office–floating around, so something will have to go by the wayside.
The graduated income tax proposal has won the praise of groups like Voices for Illinois Children, an interest group that represents social service agencies for youth.
But business groups like the Chicagoland Chamber of Commerce are lining up against the bill.
“The Chicagoland chamber and our members are opposed to this and we think it has serious consequences on the small business community,” said Chamber Vice President Michael Reever. “Most small businesses file individually. So, it’ll have a detrimental effect on S Corporations and LLC’s.”
Meanwhile, Gov. Bruce Rauner came out fervently against the proposal.
Follow Paris Schutz on Twitter: @paschutz
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