The Rockford Register Star published an opinion piece by Illinois Policy Institute's Chief Economist, Dr. Lawrence McQuillan.
Progressive income tax state's next money grab
By Lawrence McQuillan
It’s hard to believe, but there’s a cabal in Springfield who actually think Illinois government still doesn’t spend enough money. That the record tax increases of 2011 didn’t send tax bills high enough. That every challenge faced by Illinois — jobs, growth, achievement — can be solved with a government program.
The holy grail of the far left is a progressive income tax. And they’re laying the groundwork for a constitutional change to open the door to marginal tax rates above 10 percent.
Don’t be fooled by the propaganda. A progressive income tax will mean higher taxes for the middle class. Illinois should soundly reject the progressive tax.
Under a progressive income tax system, individuals are taxed at ever-higher marginal tax rates as their income rises. One progressive tax plan currently circulating around Illinois would impose — count ‘em — eight ever-higher marginal tax rates, topping off at 11 percent. This would tie Illinois with Hawaii for having the highest top rate. Today, Illinois has a flat 5 percent income tax rate, which was increased in 2011 from 3 percent.
California is the poster child for how the progressive tax actually works. The Golden State taxes personal income at seven increasingly-higher rates, including a top rate of 10.3 percent.
But California’s second-highest marginal rate of 9.3 percent kicks in at only $48,000 for single taxpayers. But back when California’s income tax first began in 1935, this tax rate applied only to people earning more than $838,000 in today’s dollars.
This is how progressivity works – start with Paris Hilton, but come after everyone else later by creeping down the income ladder.
Progressive tax supporters claim they “only want the rich to pay their fair share.” But the experience of other states proves that the middle class will pay more, too.
Currently, 34 states have a progressive income tax. In 24 of these states, a family of four with taxable income of $50,000 is taxed at a higher rate than in Illinois. To give some perspective, Winnebago County has a median household income of $47,198. So don’t be fooled; a progressive tax ultimately means higher taxes for you, too.
The progressive tax plan circulating across Illinois right now closely resembles Hawaii’s tax system. But there’s more bad news here; if Illinois adopted Hawaii’s progressive tax a family making $50,000 would pay $881 more in income taxes each year.
Wouldn’t you rather keep that money for a month or two of groceries?
Supporters of the progressive tax also claim it will solve Illinois’ persistent deficit problem. Disneyland has more reality than this claim. For proof, look again to California.
California has one of the steepest progressive income taxes, yet it faces a $16 billion deficit. Gov. Jerry Brown wants California voters to approve an even higher top rate of 13.3 percent in November. This is how progressivity works — politicians ratchet up tax rates over time to “fix” deficits, but the tax increases only allow spending to increase unchecked and deficits to continue. This is all too familiar to what happened with state spending after we forked over $7 billion thanks to last year’s income tax increase.
California is the canary in the coal mine. It has shown that progressivity means ever-higher taxes for the middle class and ever-higher state spending with endless deficits. Illinois shouldn’t copy Taxifornia.
Make no mistake, progressive-tax supporters in Illinois are plotting to take what you’ve earned. They might say they are only targeting the country club set, but they’re coming after you next. Instead of copying California, Illinois should join nine other states and abolish its income tax altogether.
Lawrence J. McQuillan, PhD, is chief economist at the Illinois Policy Institute. Contact him at LMcQuillan@illinoispolicy.org.