Coming your way in November 2020: the option to change Illinois' flat income tax to graduated rates.
Not coming your way in November 2020: a chance for tax relief and government spending reform. Not yet. And not likely unless voters demand it.
Democrats in Springfield have voted to put a referendum question on the ballot next year that, if approved by voters, would switch Illinois' constitutionally protected flat income tax to a graduated one. Under the current proposal, rates would increase on those earning more than $250,000 a year. More important, the constitutional change would empower the legislature and future governors to change tax rates and income brackets whenever they wish. Which direction do you think those rates will head?
Supporters of the idea including the amendment's House sponsor, Rep. Robert Martwick, D-Chicago, portray the change as a rescue operation. Hitting higher-income earners with a tax hike will fix Illinois' problems and put the state "on a path to fiscal prosperity for this generation and for the next," Martwick said during debate on the amendment. Gov. J.B. Pritzker made the proposal his top priority this legislative session. He'll likely pour millions of his own dollars into a marketing campaign to convince Illinoisans to vote yes.
Funny how that amendment zoomed through the Senate, then the House, on a fast track when other proposals to term-limit politicians or fairly draw district maps have gotten buried year after year. When politicians want to reach into your pocketbook, things move at lightning speed.
But make no mistake: Switching to a graduated income tax is not going to save this state. Not even close. New revenue generated under the rates proposed - optimistically, $3.4 billion per year - doesn't come close to paying down the massive debts Illinois lawmakers have piled up, including a $133.5 billion unfunded pension obligation that's still rising. Worse, hitting high-income earners will have the reverse effect of driving more residents and businesses to flee Illinois. Why should they get soaked as punishment for decades of financial mismanagement in Springfield? Boca Raton, in income-tax-free Florida, beckons.
The good news is that this fight isn't over. Lawmakers have until May 2020 to put a companion referendum on the ballot: Change the constitution's pension clause, which the Illinois Supreme Court has interpreted so rigidly that even pensions acquired under questionable circumstances have been ruled constitutionally protected. Substitute teaching for one day helped qualify a union lobbyist for a state pension. Voters should be screaming to open up that pension clause.
The way out is real reform and it's hiding in plain sight. The pension clause needs to be loosened. Benefits earned so far should and would be protected. But going forward, the legislature should be empowered to tweak those costly guarantees, such as 3% compounded cost-of-living-adjustments. The state of Arizona, with similar contractual language in that state's constitution, managed to tie annual raises for pensioners to the local cost of living - closer to 1% or 2%, not compounded.
Arizonans did this with an eyes-wide-open legislature and in partnership with public employee unions. Arizona didn't solve its pension crisis, but the state is on more solid footing.
Why should Illinois voters be denied the chance to vote on pension reform while they're voting to raise billions of dollars in new income tax revenue? With great fanfare the governor demanded that the tax question be decided democratically. "Let the people vote," Pritzker said.
Don't forget that demand: "Let the people vote," Pritzker said.
That same principle should be applied to reforming the pension clause of the constitution. Lawmakers have until May 2020 to do the right thing. They've put a graduated income tax on the ballot.
Tell your legislators you really do want to fix Illinois: When you vote on the income tax, you want to vote on a pension amendment too.
– Chicago Tribune