Graduated-rate income tax amendment forwarded to House
Revenue Committee to look at Pritzker’s proposal
An Illinois House committee on Monday advanced a proposed state constitutional amendment to allow for a graduatedrate income tax, the cornerstone of Gov. J.B. Pritzker’s plan to stabilize the state’s chronically shaky finances.
The proposed amendment was passed by the Senate on May 1 on a 40-19 straight party-line vote, exceeding the required three-fifths majority. Before going to voters for final approval on the November 2020 ballot, the amendment must pass by the same margin in the House, where Democrats hold 74 seats. With Republicans unified in opposition, they’ll need all but three of their members to vote in favor of the amendment, which would do away with a constitutionally mandated flat tax.
Democratic Reps. Jonathan Carroll of Northbrook and Sam Yingling of Grayslake, who represent affluent suburban districts, have already said publicly that they aren’t ready to vote in favor of the graduated tax plan. Unless they can be persuaded, House Democrats can only afford one other defection.
Carroll cast a yes vote in Monday’s House Revenue and Finance Committee hearing to send the plan to the House floor but said he still has “strong reservations.”
“I believe this is way too important of an issue for us not to bring to the floor, so you’re going to have an aye vote from me now,” Carroll said. “But that does not necessarily mean you’ll get my support on the floor.”
The committee voted 9-6 to send the bill to the floor. The committee did not take up a bill that would set rates for the graduated tax, which taxes higher incomes at higher rates.
Nor did it consider other measures the Senate passed in an effort to make the proposal more palatable. In addition to the proposed amendment, the Senate passed two separate bills that would only take effect if voters approve the constitutional change: one setting up a possible freeze on school district property taxes and one eliminating the estate tax at the state level. The Senate also set up rates that differed slightly from those initially put forth by Pritzker.
Opponents to a graduated tax testified on Monday that it would place a financial burden on employers that could force some to move out of state.
House Republican leader Jim Durkin questioned the administration’s reasoning for pushing for a vote in advance of the General Assembly’s May 31 adjournment, when the deadline for getting a measure on the November 2020 ballot falls 180 days before that election.
“I think you’re asking for a lot in a very short amount of time,” Durkin said.
Lawmakers aren’t required to pass legislation setting new graduated tax rates before voters consider an amendment, but Pritzker and other supporters have said it’s important for the public to know what the rates would be before casting their ballots.
Opponents are already arguing that approving the constitutional change would be handing a blank check to Pritzker and the Democrats who control the legislature.
House Democrats are still negotiating with the governor’s office over the rate structure and potential property tax relief, a key issue for some holdouts.
“They want to use that leverage to extract as much property tax relief as they can,” Rep. Robert Martwick, a Chicago Democrat who’s sponsoring the proposed constitutional amendment, said before Monday’s hearing. “When you’ve got a rate structure that’s going to get you enough to close the structural deficit and a little more, then you have to figure out where it fits into the list of priorities.”
Asked during Monday’s committee meeting how a rate proposal in the House will differ from proposals from Pritzker’s administration and the Senate, Martwick said he expects it will be “substantially similar to what we’ve seen.”
While Senate Democrats stuck to Pritzker’s broad outline of raising taxes only on those making more than $250,000 a year, their plan would raise the top rate to 7.99%, compared with the governor’s proposed 7.95%. The current rate is 4.95% for all taxpayers. It also would lower the income threshold at which the top rate kicks in for single filers to $750,000. Pritzker’s plan called for the top rate to hit single and joint filers earning more than $1 million.
A key piece of the Senate package would freeze school district property tax rates if the state meets its education funding obligations. That includes increasing state funding for elementary and secondary schools by $350 million each year and fully funding bus service, special education and other line items, something lawmakers haven’t accomplished in years.