ST. CHARLES – In November, voters will decide whether to replace the state's flat-rate income tax with a graduated rate structure.
During a Zoom meeting on Tuesday, the St. Charles Chamber of Commerce's Legislative Committee hosted a discussion on the issue in partnership with the Illinois Chamber of Commerce and the Center for Tax and Budget Accountability.
If approved by voters, those taxpayers filing jointly with incomes of $100,000 or less would pay rates slightly lower than the current rate of 4.95%. Couples with joint incomes of more than $250,000 – would see rates increase to 7.75%, with millionaires filing jointly paying 7.99%.
Ralph Martire, executive director of the Center for Tax and Budget Accountability, spoke in favor of the proposal.
"The bottom 20% in income in Illinois pay 14.4% of that income in state and local taxes, whereas the wealthiest 1% in our state pay only 7% of their income in state and local taxes," Martire said. "Now that's a problem, because of what's actually happened in the private sector economy since 1979."
He said that from 1979 to 2017, the wealthiest 1% in Illinois saw their average incomes increase from $411,000 a year on average to $1.4 million, or a growth in real terms of 254%.
"Over that same 40 years, the bottom 99% of taxpayers – literally everybody else – saw their average incomes jump from only $51,000 a year to $61,000 a year, or a 20% increase," Martire said. "So the vast majority of all income growth in the Illinois economy has gone to the wealthiest households."
The data comes from the Internal Revenue Service, he said. Martire said now is the right time to make a change to the tax system, pointing to studies showing that raising taxes only on the wealthy while cutting taxes on low and moderate income families will help a state recovery quicker from a recession. The United States is in a recession because of the COVID-19 pandemic.
But Keith Staats, executive director of the Illinois Chamber Tax Institute, contended that a graduated income tax is not a fair tax.
"A graduated income tax punishes the successful by taxing a greater percentage of their income," Staats said. "The flat rate tax ensures that all citizens pay their fair share to fund state government."
He noted that taxpayers with annual income of $25,000 or less paid 2.4% of total state individual income tax revenues. In comparison, Staats said. In comparison, he said taxpayers reporting annual income of more than $500,000 paid 23.9% of total state individual income tax revenues.
"The flat rate tax is a fair tax," he said. "It provides a necessary break on tax rate increases on individuals. Everyone at all income levels share the pain of a tax rate increase."
Staats said the state's current flat income tax is one of the best economic advantages over other states. In addition, he said a graduated income tax would make it easier to raise taxes.