Illinois Dems Drop Plans for Tax Surcharge, Progressive Income Tax

Illinois Dems Drop Plans for Tax Surcharge, Progressive Income Tax
April 30, 2014

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)

Democrat leaders in Illinois have given up their attempts—for now—to impose an income tax surcharge on high-income earners and create a “progressive” income tax to replace the current flat-rate tax.

State Senate President Pro Tempore Don Harmon (D-Oak Park) acknowledged in late April he could not muster enough votes before the end of the spring session to okay a statewide referendum for an income tax that would charge higher rates on higher incomes.

Earlier in the month, House Speaker Michael Madigan (D-Chicago) dropped plans for a 3 percentage-point tax surcharge on persons with incomes of $1 million or more. He needed every Democrat legislator to support the measure but was stymied by two holdouts—State Reps. Scott Drury (D-Highwood) and Jack Franks (D-Marengo).

Harmon called his measure the “Fair Tax” because he said it’s fair that people who earn higher incomes pay higher tax rates.

“The Fair Tax has gained significant momentum in the last year, and I’m committed to continuing to work to get this passed in the fall veto session later this year,” Harmon said in a statement.

‘Massive Tax on Middle Class’

"The progressive tax was sold as a 'fair tax' that would 'make the rich pay their fair share.' However, the more information taxpayers received about the progressive tax, the more they realized it would have equated to a massive tax increase on middle-class Illinoisans that would only serve to feed Springfield's insatiable appetite for overspending,” said John Tillman, CEO of the Illinois Policy Institute. “Illinois government doesn't need more money. Instead, legislators need to focus on truly reforming Illinois' budget and bringing jobs back to our great state.”

Three years ago the Democrat-dominated Illinois General Assembly—with no Republican votes—raised the state’s personal income tax rate from 3 percent to 5 percent, a 67 percent increase in the tax rate. That increase, coupled with a 46 percent increase in the state’s corporate tax, has taken an additional $31 billion from Illinois residents and businesses. The tax increases are scheduled to roll back partially in January 2015.

More Money, Worse Problems

Gov. Pat Quinn (D) and other Democrat leaders want to make the temporary tax increases permanent. Despite billions of dollars of additional revenue, Illinois’ fiscal situation has worsened, with the state having the nation’s worst pension funding, lowest credit rating among the 50 states, and second-highest unemployment rate. Quinn and legislative Democrats say the state government cannot afford to lose the revenue. When they passed the tax increases, they promised the extra revenue would be used to fix the state’s fiscal problems.

David From, Illinois state director of Americans for Prosperity, said the Madigan and progressive income tax proposals would further hurt jobs prospects in the state:

“With the second-highest unemployment rate in the nation, one would think the Democrat leaders of Illinois would want to grow jobs for our families. Unfortunately, yet again they choose to pursue policies that will push more jobs out of the Land of Lincoln by punishing job creators,” he said in a statement.

Steve Stanek

Steve Stanek (sstanek@heartland.org) is a research fellow at The Heartland Institute and managing... (read full bio)