This weekend marks the three-year anniversary of the 2011 state income tax increase. But the anniversary also marks another milestone for taxpayers: we are just one year away from tax relief.
Illinois taxpayers currently fork over 5 percent of their paycheck to the state. Politicians like to say that 5 percent of your household income isn’t much. Many believe the Illinois tax rate should be much higher.
But say your family has the average Illinois household income of $75,000. After a few deductions, your state tax bill can total roughly $3,500. But paying your state tax bill doesn’t leave you with $71,500 in the bank. You pay your state tax bill on top of paying city taxes, school district taxes, park district taxes, federal taxes, health care costs, food expenses and spending money to keep a roof over your family’s heads. Bottom line: it doesn’t leave you with much.
But finally, in 2015 Illinoisans will see tax relief. The state income tax rate is slated to drop to 3.75 percent in January 2015. Illinois’ sky-high business taxes – which recently prompted OfficeMax to move its headquarters to Florida – are scheduled to decrease as well. It’s long awaited and welcome news for our economy.
When the tax hike was passed, lawmakers justified it by saying the money would be used to pay off an $8.5 billion backlog of bills and fix the state’s lagging economy.
By summertime, when the current fiscal year for state government ends, Illinois politicians will have collected more than $25 billion from the 2011 state income tax increase. Coupled with a few solid reforms, that would have been more than enough money to pay down the state’s debts, yet a backlog of bills remains and the state economy remains in shambles.
It’s not just the economic indicators talking; a We Ask America poll commissioned by the Illinois Policy Institute found that more than 70 percent of Illinoisans surveyed feel the 2011 tax hike has neither helped Illinois’ finances nor improved the state’s economy.
Illinois politicians don’t want to be held accountable for that truth, so as we approach tax relief they’ll once again cry poor. Or better yet, they’ll say it’s time to pass additional “tax reform” – because they know Illinoisans are tired of tax “hikes.”
What will this supposed “reform” look like? There’s a plan in Illinois to swap out the state’s constitutionally protected flat-rate income tax for a progressive tax that would force taxpayers to pay higher tax rates as their income increases.
Say you earn $58,000. You work hard. You pay your taxes. Finally, in recognition of your hard work, you get a promotion, or maybe a raise. Under state Rep. Naomi Jakobsson’s (D-Champaign) tax-hike plan, you’d be forced to send a larger portion of your new income to the tax man. That’s because under a progressive tax, as you start to improve your income, Illinois state government would get a bigger cut.
This isn’t what Illinois taxpayers want. The same We Ask America poll also found only 33 percent of Illinoisans surveyed support a progressive income tax.
Politicians should take notice: We don’t want more taxes. We want money in our pockets so we can spend it in our communities and on our families, and so we can get our businesses growing again.
Instead of increasing taxes again, politicians should keep their promise to reduce the income tax rate for all Illinois taxpayers in 2015.
Politicians have already raked in more than enough money from the 2011 tax hike; let’s not give them a penny more.
Senior Budget and Tax Policy Analyst
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