Dramatic tax overhaul

Democrats challenge Rauner with dramatic tax overhaul 

By Natasha Korecki

Illinois Democrats are pushing to revamp the state’s tax structure in a way that would tax the rich at higher rates while giving a break to more than 99 percent of the state’s residents.

The proposal itself is a thumb in the eye of Republican Gov. Bruce Rauner, a multimillionaire whose circle includes some of the wealthiest individuals in the world, including billionaires Ken Griffin and Sam Zell. They would be hardest hit by such a system.

Democrats who control the General Assembly this week are moving forward with a series of bills that would set in motion a change to the state’s constitution to dump Illinois’ flat tax and instead implement a graduated taxing system. They do so as the state is billions of dollars behind in bills, and in pension debt, having gone almost a year without an authorized spending plan.

Progressive Democrats have long sought a so-called “fair tax” in Illinois, complaining that neighboring states like Wisconsin capture much-needed revenue because it taxes individuals based on their income, rather than at the same, across-the-board percentage. They also argue that politicians have long put off raising taxes because the structure would place a burden on everyone in the state across the board. A graduated system, they argue, protects middle class and low-income workers. It's no silver bullet, estimated to bring just $1.9 billion in revenue starting next year, if passed.

The Rauner administration, however, said the move would cripple the state’s economy.

“The majority party’s desire to skyrocket taxes is breathtaking,” said Rauner spokeswoman Catherine Kelly in a statement. “A progressive income tax would be the straw that breaks the Illinois economy’s back – sending our state even further into the economic doldrums. It’s beyond time for Democrats to come to the table and work with the governor to find common ground on real structural reforms that will get our economy moving in the right direction.”

Still, a plan that gives tax breaks to most residents while shifting the burden to the top one percent has populist appeal. That’s what Democrats are banking on.

The Illinois proposal would follow two tracks: first, passing a bill to add a question to the November ballot, requiring supermajority votes in both chambers. With the May deadline for ballot questions quickly approaching, the legislation is on a fast track. The second track is an “only if” bill that would set forth specifics on rates and if passed would go into effect in 2017 only if voters approve the ballot question.

Carrying the “only if” bill in the House, state Rep. Lou Lang, D-Skokie, said he believes the proposal has a “good shot” at passing, noting that the amendment vote will have to attract votes from at least some Republicans since at least some Democrats are expected to oppose it. Lang says some Republicans have privately been open to the discussion.

“Very few have dismissed it out of hand,” Lang said Monday. “It does put them in an odd position because most of their constituents are going to get a tax cut.”

Under the proposal, those reporting more less than $100,000 annually would pay a 3.5 percent tax, those earning 100,000 to $500,000 would be taxed at a rate of 3.75 percent.

The big jumps comes for those with more than $750,000 in annual income, who would be taxed at 8.75 percent for married couples.

Iowa, Wisconsin and Missouri are among the Midwestern states that administer a graduated income tax.

“When you are here in the building, there is a general consensus that we need new revenue. The cuts have been deep and painful. There is an admission that we need new revenue,” said Kristen Crowell, who is heading up the Fair Tax effort. “It’s one that they can take back home and say to Middle Class families, ‘you're going to get a tax cut.’ It pretty much is a win-win. If you take a step back from the intense partisan nature right now, this is just good public policy. This is a pretty easy yes vote.”

But Republicans say such a change in Illinois would only worsen an already dicey financial situation here and drive business owners out of the state.

“I would rather discuss a comprehensive budget solution which is what has caused the problems in Springfield rather than continuing down the path of 100 percent propaganda votes to be used for campaign fodder,” GOP House Leader Jim Durkin said. “Quit the politics. Work with us on our priorities. … Democrats are charting a course that is more than likely to move us apart.”