The Illinois Fair Tax Amendment is on the Nov 3 Election docket for Illinois voters.
The amendment targets family incomes over $250,000 with a new 7.9% tax rate (versus the current 4.95% rate). It also allows for separate city income taxes which may have the greatest long term impact.
Currently the Illinois state family income tax burden index in middle of the pack (i.e 4.95% flat rate) . This will increase of course with the proposed two tiered rate system (4.95% and 7.9% over $250K). Note, that 4.95% rate will decrease to 4.90% for family income under $100K offering rather insignificant annual savings (i.e under $500)
C corporations tax rate will increase from 7% to 7.9%. S corp and partnerships passthroughs will not be impacted.
It all appears rather benign in nature but in my eyes, given the State Assembly’s history, a case can be argued that Fair Tax Amendment is more about opening the door for ease of future budget-convenient tax rate increases (notoriously easy under graduated rates), and for new city imposed income taxes than it is to target high family incomes.
And while the amendment will have little impact on family income under $250,000, the tax increase for those over this amount is a jump far beyond your average rate increase i.e a 33% increase.
Lastly, in my eyes the Fair Tax Amendment timing is curious given the fact State is currently last among in tax fairness, and among the top states in highest tax burden, and who’s fiscal issues are notoriously spending related rather than income generation. An argument can be made that a spending, and not tax, amendment is the way to go. Perhaps a true balance budget amendment to replace the current one that currently allows debt to balance the budget.
Stay safe. And be sure to vote!!