Posted Online: Jan. 23, 2013, 2:27 pm
Progressive tax on horizon for Illinois?
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By Scott Reeder
The state constitution mandates a flat-rate income rate, but there is a movement afoot to amend the constitution to allow for a progressive income tax.
State Rep. Naomi Jakobsson, D-Champaign, introduced House Joint Resolution Constitutional Amendment 2 this past week -- which would create a progressive income tax.
As a legislative reporter, my usual reaction to proposed constitutional amendments is to shrug. They rarely see the light of day. It's a tortuous path to go from an idea to being enshrined in the Constitution.
For example, during the 97th General Assembly that ended this month, lawmakers proposed 82 constitutional amendments and only one was placed on the ballot by the Illinois Legislature. And even that amendment wasn't approved by the voters.
In fact, of the 18 proposed amendments placed on the ballot since the 1970 Illinois Constitution was adopted, only 11 were approved, according to the Legislative Research Unit. But Jakobsson's proposal has the potential to defy the odds.
"I'd say there is a better than 50 percent chance that they will consider a progressive income tax," said longtime legislative observer Mike Lawrence, a past director of the Paul Simon Public Policy Institute at Southern Illinois University.
To amend the constitution, three-fifths of the Illinois House and Senate have to vote to place the issue on the ballot, where it must be approved by more than 50 percent of those voting in the election or 60 percent of those voting on the issue.
Public employee unions are pushing hard for a progressive income tax, said Todd Maisch, a lobbyist for the Illinois Chamber of Commerce, which opposes the switch on the grounds that it would further damage the state's business climate.
But state Sen. Mike Jacobs, D-East Moline, disagrees. "We are in a situation where we are being forced to do something," said Jacobs. "Pensions are just a reoccurring problem for us. We have to come up with a solution, and a progressive income tax just may be the solution. Over in Iowa they already have a progressive income tax and things are going great for them."
While it's true Iowa has many things going for it, the progressive tax isn't one of them.
When I was a reporter in the Quad-Cities in the 1990s I wrote about the propensity of high-income individuals living in the Iowa Quad-Cities to relocate to the Illinois side of the river to avoid the Hawkeye State's high taxes.
Back then Illinois' income tax rate was 3 percent. Now it is 5 percent. And if the door is opened for a progressive income tax, the top rate will be much higher than that.
In 2011 -- when our state income taxes were jacked up 67 percent -- Illinois ranked first among the 50 states in number of people leaving, according to a recently released United Van Lines report. It ranked second in 2012.
"About the only thing Illinois has going for it in the area of competitiveness is that flat tax," said state Sen. Kyle McCarter, R-Lebanon. "Our workers' compensation rates are high and our litigation environment is not good. That flat tax 99 especially when it was at 3 percent 99 was one of the only advantages we had. Do we really want to throw that away?"
But to me the most compelling argument against making the switch is that state revenues are at peak. That's right -- state government is collecting more than ever and it's still broke.
It would appear the state has a spending problem rather than a revenue problem. That said, the political prospects for a progressive income tax remain unclear.
"One party has super-majorities in both the House and Senate -- that's a situation we've never faced before. We really don't know what will happen," Maisch said. "We are prepared to fight this if it comes up. Does it make sense Illinois to give up one of the few advantages it has?"
Scott Reeder is a veteran statehouse reporter and the journalist in residence at the Illinois Policy Institute; email@example.com.