A graduated income tax could put Illinois in the

New Post Public Reply Private Reply Replies (1) Message Board

Aug 15, 2016 at 1:04 PM

Quote:

A graduated income tax could put Illinois in the clear

By Curtis Black | April 21, 2016

SPRINGFIELD, ILLINOIS, USA - SEPTEMBER 1; Ornate dome inside state capital building/Shutterstock

Instituting a progressive income tax in Illinois would destroy the economy and drive people to flee the state, according to Gov. Bruce Rauner and his supporters.

After the economic refugees got over the border, however, they’d have to keep running. That’s because income tax rates are higher in every bordering state, according to a recent study by the Illinois Economic Policy Institute.

Illinois currently has a flat 3.75 percent individual income tax. Indiana is the only neighboring state with a flat rate – it’s 3.3 percent. But Indiana permits counties to levy income taxes, and the average county rate is 1.5 percent.

The other states have progressive rates; the lowest is Missouri’s, which rises in steps from 1.5 percent to 6 percent – that’s for people earning less than $1,000 a year and those earning over $9,000 a year, respectively. Wisconsin’s top rate, which is for individuals earning over $69,000 a year, is 7.65 percent; Iowa’s is 8.9 percent for people earning over $60,000.

Looking at the combination of state and local taxes, all the states have regressive tax structures, with poor people paying a higher proportion of their income than the wealthy.

But Illinois is the worst. Here the bottom fifth of earners pay 13 percent of their income in state and local taxes, while the top 1 percent pays 4.6 percent, or about a third of what poor people pay.

Compare that to Wisconsin, where the bottom fifth pays about 9 percent of its income, and the top 1 percent pays a little over 6 percent.

Progressive taxation is fairer, since the people who pay more are those who can afford to, and it’s also more efficient and stable because it taxes the sector that has benefited from economic growth for the past several decades.

But perhaps the most interesting statistic – particularly with our accumulated budget deficit topping $9 billion and growing – is how the neighboring states bring in much more revenue than Illinois. That’s not just from a smarter income tax; it’s because unlike Illinois, they’ve all extended their sales taxes to cover services, and they all tax some retirement income.

Adopting Indiana’s tax structure would give Illinois $4.6 billion more each year. Using Iowa’s structure would bring in $7.3 billion more, and Wisconsin’s would yield $8.3 billion more.

That would put Illinois in the clear.

House Democrats have introduced a constitutional amendment to permit a progressive income tax; and if that’s passed, they will introduce legislation that would provide a tax cut to all but the wealthiest taxpayers in the state and raise an additional $1.9 billion a year.

Under that plan, introduced by Rep. Lou Lang, D-Skokie, the tax rate on incomes up to $100,000 (twice that for couples) would be reduced to 3.5 percent. It would rise to the current rate of 3.75 for income up to $500,000, to 8.75 for the next $500,000, and to 9.75 for income over $1 million ($1.5 million for couples).

According to Voices for Illinois Children, that means a couple earning $1 million would pay an additional $11,785 in income taxes.

That’s probably not enough to cover their costs of relocating -- especially when they’d end up paying higher taxes if they moved next door.

Lang’s proposal doesn’t put Illinois’ budget in the black, but it goes part of the way. According to the Center for Tax and Budget Accountability, the state could raise an additional $2 billion by extending the sales tax and another $1 billion by taxing retirement income over $50,000. And there are huge corporate tax loopholes that are ripe for the closing.

For decades, Springfield Democrats have shied away from these kinds of reforms, putting their political fortunes ahead of fiscal responsibility. Now Rauner has brought the state to the brink of disaster; maybe the legislature will muster the courage to act.

Newer

Older

Scroll down for more posts ▼

Top 10 Most Recent News Articles

NEXA Unlimited: Disrupting Mortgage Broker Earnings

What Exactly Is NEXA Unlimited? In a game-changer twist, NEXA Lending has launched something that could dramatically shuffle the current mortgage broker model deck. Dubbed NEXA Unlimited, this new model promises no less than 100% revenue access to its loan officers. We're talking zero fees—flat, funding, closing—none of ‘em. This isn't a small tweak or a cosmetic...

Corner Bakery Cafe Unveils Fall Treat Lineup

Get Ready for a Fall Feast at Corner Bakery Cafe Pumpkin spice season is here, whether you're thrilled or grumbling about it. Corner Bakery Cafe is throwing its hat in the seasonal ring, bringing back its crowd-pleaser Pumpkin Latte—available hot, iced, or as a cold brew. They're also rolling out a lineup full of tempting treats aimed to capture those autumn cravings....

American Tungsten's Bold Play in Nevada is Noteworthy

American Tungsten's Shifting Focus Today we're chewing over some intriguing moves from American Tungsten & Antimony, Ltd. (ASX: AT4; OTCQX: ATALF). These cats are eyeing a chunk of the strategic metals market. They've engaged Metso Finland Oy to whip up a Scoping Study for an ammonium paratungstate (APT) production circuit at their Del Sol Refinery in Nevada. Why Tungsten...

Cherubic Ventures' Fund VI: A New Chapter in AI Investments

Fundraising Winds of Change Ah, the dance of numbers and meaning in the world of venture capital. Cherubic Ventures has just waltzed in with a new move, closing their Fund VI at a peculiar $68.88 million. Now, why the love for number eight? Besides its cultural sheen in East Asia promising prosperity and good fortune, it greases the wheels for this firm's venture into...

Europe Identifies Future Global Champions: 100 Firms

A Fresh Start for European Growth Europe's plot to outshine the big players like the US and China in the business arena takes a fresh twist in Slovenia. The Future 500 Initiative has rolled out a data-driven selection model pinpointing 100 high-growth Slovenian companies that have seen their revenues soar to an impressive €2.1 billion. Finally, a method that aims to...

Quandri Joins Applied Systems Certification for AI Edge

Quandri Steps Into the Limelight with Vendor Certification Alright, so you’ve got Quandri, an up-and-coming player on the insurance tech scene, making some hefty strides by snatching a coveted spot in Applied Systems' brand new Vendor Certification Program. Yeah, it sounds like another day at the software club, but what this really means is less runaround and more...

ICOGT's Global Expansion Targets Dynamic Markets

ICOGT's Ambitious Expansion Plan When the winds of change blow, some build walls, others build wind turbines—and ICOGT is choosing the latter with its ambitious international expansion. September kicks off a new phase for INTERNATIONAL COMPANY OIL & GAS SERVICES & GENERAL TRADING L.L.C, as they lace up for a strategic sprint across key global markets, focusing heavily...

Peak Credit Union Backs Oregon Pickleball Initiative

Big Moves in Eugene: Credit Union Steps Up It’s a different ball game when a credit union dives headfirst into the local recreation scene, but that’s exactly what Peak Credit Union is doing in Eugene, Oregon. Coming in hot with a hefty $500,000 pledge, they’re spearheading the development of a new pickleball complex at Lane Community College. We're talking 24 courts...

Student Mobility and Education: A Vital Intersection

Ritu Narayan’s Book Sparks a Vital Conversation They say never judge a book by its cover, but Ritu Narayan’s newly crowned bestseller, The Most Important Commute, begs us to look beyond the page: it's the saga of a bus ride, as mundane as rain until you peel back the layers of what it means for education today. Could something as seemingly simple as a school bus ride...

HiTHIUM Surges in Global Energy Storage Battle

Man, those aren't small potatoes in the energy storage realm! HiTHIUM’s blitz on the global rankings has caught my eye, and I don’t toss around praise lightly. The news out of Xiamen is that HiTHIUM secured the number two spot globally in energy storage battery shipments once again. That’s not just a medal; it’s a flashing beacon in a sector skyrocketing faster...