Illinois General Assembly
The Senate was in session this week from Tuesday May 1 through Thursday May 3. The House was not in session next week.
Activity was rather light in the Senate this week.
SB 2744 - The bill includes an amendment of the Property Tax Code to deal with the eligibility of township and multi-township assessors. The bill also provides that in the case of assessments made by the Department of Revenue, the Department shall publish a complete list of assessments on the Department's official website. Currently, the list is only required to be published in the "official state newspaper."
The Senate Revenue committee met this week on Wednesday. Here is a link
to the bills that were posted for committee consideration. Of note is
HB 4237
the legislation that is designed to provide a "work around" to the federal $10,000 SALT deduction cap. HB 4237 was posted, but was not called for a vote this week. SB 2744, discussed above, was considered and passed by the committee.
The Senate Revenue committee has scheduled a hearing next week on May 9 at 5:00. Here is a link to the bills that have so far been posted for consideration.
As of this morning, the House Revenue committee has not scheduled a hearing for next week.
Graduated income tax hearing
The House Revenue committee held a subject matter hearing in Chicago on May 2 to take testimony on HR 1025 sponsored by Speaker Madigan. HR 1025 urges support for the implementation of a "progressive" (graduated) income tax. At the hearing, the committee took testimony on the resolution. I testified in opposition to Speaker Madigan's resolution. I explained that we oppose a graduated income tax for a number of reasons which I discussed in my testimony but fundamentally because there is nothing inherently more "fair" about punishing success by imposing a higher tax rate on the successful.
Although the deadline for passing a constitutional amendment out of the General Assembly for the November ballot cannot be met, this discussion will continue over the next two years and depending on the composition of the Illinois General Assembly after the November election there could be enough votes to place such an amendment on the ballot in November 2020.
There will be continuing discussions on this issue over the next two years. I would note that some of the proposed constitutional amendments would authorize a graduated income tax on both individuals and corporations. SFRCA0001, and SJRCA 0016 It is important that people are educated about this issue and understand the numbers.
A number of groups spoke in favor of moving to a graduated income tax, including a representative of the the Center for Tax and Budget Accountability ("CTBA". Earlier this week CTBA issued a report entitled Moving to a Graduated State Income Tax in Illinois.
Whatever you think of the proposals of the CTBA, and I generally strongly disagree with their proposals, they do "show their work." They back up their proposals with numbers. I don't always agree with their numbers, but they do provide a basis for discussion. Most of the other proponents who spoke at the hearing outlined deficiencies in current state funding and support a graduated income for the additional funding for state services that they anticipate they would receive. Representative Currie, who presented the resolution for Speaker Madigan declined to reference any sort of specific legislation only stating that they seek the authority to implement a graduated tax.
The CTBA report claims that their proposal, would raise an additional $2 billion in general funds revenues, while providing a tax cut to 98% of taxpayers. In my testimony I delved into their numbers.
I pointed out that the CTBA report is instructive in that it illustrates the inherent difficulty in implementing a graduated income tax that raises substantial new revenues, without significantly increasing the tax burden on the middle class.
The CTBA report contains two graduated income tax proposals. The first proposal recommends leaving the current tax rate of 4.95% in effect for all taxpayers with less than $300,000 in income. Those with incomes over $300,000 would see their rates balloon to 7.5% to 9.85%. Their "tax cut" to 98% of taxpayers is in the form of a $300 tax credit that phases out at $200,000. In other words, a tax reduction of $12.50 a paycheck for someone who is paid bi-monthly.
The second proposal would reduce the tax rate to 4.5% for income up to $100,000, the current 4.95% rate for income up to $300,000 and rates that range from 8.00% to 9.85% for higher income levels. The "reductions" under the second proposal are also minimal - $225 for someone with $50,000 in income.
The $2 billion number is close to what some have indicated is the current structural deficit. I pointed out that, assuming there is no political will to make cuts to state spending, there just aren't enough "rich" people to tax at higher rates under a graduated income tax to provide all the additional revenues sought by the proponents who testified before me.
I also rebutted the tired argument that the current system collects inadequate revenue because of "corporate loopholes." There has been significant tax base erosion via credits and deductions provided overwhelmingly to individuals - not to businesses - including the $1.8 billion exemption for federally taxed retirement income and $1.98 billion state sales tax exemption for food and drugs.(These are FY 2016 numbers)
I also noted that even in the face of the state's budget woes last year, the General Assembly continues to enact new tax credits - Invest in Kids private schools scholarship program ($75,000,000), a new disaster relief credit, a new teacher credit for instructional materials, and an increase to the education expense credit.
I explained the proponents of the graduated income tax are mistaken if they they thing\k the tax can be implemented and all their spending desires accomplished without taxing the middle class. I also pointed out that it is equally unrealistic for the folks on the other side of the spectrum to argue that taxes can be reduced if only cuts are made -- there is no political will among the members of the General Assembly to make those kinds of cuts and that is not likely to change in the foreseeable future.
My recommendation is that rather than amend the constitution to obtain authority to adopt a graduated income tax, there needs to be fiscal restraint and the General Assembly should engage in a comprehensive review of the Illinois tax structure wit the goal of modernizing and rationalizing the current tax structure with the bounds of the existing constitution.
Publications
I've
linked an interesting analysis of the recent oral argument before the U.S. Supreme Court in South Dakota v. Wayfair by the folks at Grant Thornton.
The Illinois General Assembly Commission on Government Forecasting and Accountability has issued its Monthly Briefing for the Month Ended:
April 2018.
