Progressive tax facts

Several special interest groups and lawmakers in Illinois are pushing to increase taxes by swapping out the state’s constitutionally protected flat rate income tax for a progressive income tax. Advocates for higher income taxes try to disguise the tax hike as something it isn’t. Here are the facts on a progressive income tax: Thirty-one of...

Several special interest groups and lawmakers in Illinois are pushing to increase taxes by swapping out the state’s constitutionally protected flat rate income tax for a progressive income tax. Advocates for higher income taxes try to disguise the tax hike as something it isn’t. Here are the facts on a progressive income tax:

• Thirty-one of 33 progressive tax states tax the middle class at a higher rate than Illinois’ 2015 rate of 3.75 percent (North Carolina abandoned its progressive income tax for a flat tax earlier this year).

• Progressive tax states often have top marginal tax rates that hit middle-and low-income earners. Consider the following examples:

• Georgia has six income tax brackets, the highest being 6 percent on incomes of more than $7,000
• Louisiana has three income tax brackets, the highest being 6 percent on incomes of more than $50,000
• Mississippi has three income tax brackets, the highest being 5 percent on incomes of more than 10,000
• Missouri has 10 income tax brackets, the highest being 6 percent on incomes of more than $9,000
• Montana has seven income tax brackets, the highest being 6.9 percent on incomes of more than $16,400
• Nebraska has four income tax brackets, the highest being 6.84 percent on income of more than $27,000
• Virginia has four income tax brackets, the highest being 5.75 percent on income a of more than $17,000

• Using data going back to 1960, in any 10-year period, states without an income tax consistently outperformed the highest-tax states in many different fiscal benchmarks. Most recently, between 2001 and 2011, the nine states with no income tax outperformed the nine states with the highest income taxes in population growth, Gross State Product growth, nonfarm payroll employment, and state and local tax revenue. Consider the following statistics for this time period:

• Population growth:

• No-tax states: 15 percent
• High-tax states: 6 percent

• Gross State Product growth:

• No-tax states: 63.5 percent
• High-tax states: 45.2 percent

• Nonfarm payroll employment:

• No-tax states: 12.7 percent
• High-tax states: 4.9 percent

• State and local tax revenue:

• No-tax states: 76.3 percent
• High-tax states: 47.9 percent

• The nine states with no personal income tax gained $113.17 billion in adjusted gross income between 2000 and 2010; the nine states with the highest personal income tax rates lost $90.05 billion over the same period.

• The Center for Tax and Budget Accountability, or CTBA, proposed the following progressive tax rates for Illinois:

• 5 percent on $5,000 to $100,000
• 7.5 percent  on 100,000 to $150,000
• 8.5 percent  on $150,000 to $200,000
• 9.5 percent  on $200,000 to $300,000
• 10 percent  on $300,000 to $500,000
• 10.5 percent  on $500,000 to $1,000,000
• 11 percent  on income greater than 1,000,000

• The CTBA’s proposed progressive tax plan would:

• Increase taxes by $6.4 billion compared to the 2015 sunset rate
• Increase taxes by $8.64 billion when compared to a repeal of the 2011 tax hike
• Increase tax rates on 85 percent of Illinois taxpayers
• Increase taxes by 35 percent on Illinois’ middle class
• Cut Illinois’ economic output by $19 billion to $26 billion
• Destroy 65,000 to 88,000 Illinois jobs

• Illinois is already a high-tax state

• State and local tax burden per capita in 2010: ninth-highest in the nation
• State and local tax burden in 2010: $4,512 per capita
• State and local tax burden as a percentage of state income in 2010: 10.2  percent
• 2013 sales tax, combined state and local, in 2013: 12th-highest, 8.13  percent
• Median property taxes paid on homes in 2010: seventh-highest, $3,507
• Median property tax as a percentage of home value in 2011: second-highest, 1.91 percent
• Gasoline tax in 2013: fifth-highest, 0.39 cents per gallon
• Alcohol taxes per gallon in 2013:

• Beer: 27th-highest, 0.23 cents
• Wine: 10th-highest, $1.39
• Spirits: 14th-highest, $8.55

• Cigarette tax in 2013: 15th-highest, $1.98 per pack
• State and local cell phone tax in 2012: fifth-highest, 15.9  percent
• Estate tax in 2010: 13th highest, $2,418 per death
• Travel taxes in Chicago per day in 2012: highest in the nation
• Income tax collections per capita in 2011: 22nd-highest, $873
• Corporate income tax in 2011: fourth-highest, 9.5  percent

• The top 1 percent of taxpayers pay more than 20 percent of Illinois’ income tax burden.

• The top 16 percent of taxpayers pay 60 percent of Illinois’ income tax burden.

• Illinoisans with an annual base income of more than $1 million pay an average tax 47 times higher than the average non-millionaire resident.

• Illinois doesn’t have a revenue problem; it has a spending problem. Illinois has more revenue than it ever has, and spending has outpaced growth in population and inflation by 3-to-1.

• Progressive income tax structures cause wild swings in revenue. When times are good, revenues rise. But when economic slowdowns occur, revenues plummet and that hurts the very people who are most vulnerable: the poor who are receiving help from government.

• Fifty-eight percent of the growth in unfunded state pension liabilities from 1996 to 2012 were due to flaws in the defined benefit pension plan:

• Poor investment returns: $17.2 billion
• Benefit increases $5.8 billion
• Changes in actuarial assumptions: $8.8 billion
• Other factors: $12.9 billion