The drumbeat continues for a graduated income tax in Illinois. Although House Bill 3522 was tabled in late April, House Resolution 1025—proposed by House Speaker Mike Madigan—lives on and is supported by 47 cosponsors. And in general, the issue has widespread agreement and support from the state’s Democrat lawmakers and gubernatorial candidate J.B. Pritzker.
Under HB 3522, proposed by Rep. Robert Martwick, Illinois would have dropped its current flat rate individual income tax structure and adopted a four-bracket tiered system instead. Instead of 4.95 percent for individuals and 6.45 percent for pass-through businesses, the tax rates would change to:
- 4 percent (individual) or 6.5 percent (pass-through business) for income up to $7,500
- 5.84 percent (individual) or 7.34 percent (pass-through) for income exceeding $7,500 up to $15,000
- 6.27 percent (individual) or 7.77 percent (pass-through) for income exceeding $15,000 up to $225,000
- 7.65 percent (individual) or 9.15 percent (pass-through) for income above $225,000
And though HB 3522 has been tabled for now, this specific legislation could resurface, or the specifics could be incorporated into another measure. NFIB/IL continues to be steadfastly opposed to a graduated income tax because it would disproportionately impact small businesses filing their taxes as pass-through entities—and furthermore, depending on how the tax is structured, C-corporations could be hit especially hard as well.
With Illinois’ ongoing financial problems—including terrible credit ratings and billions in unpaid bills and unpaid pension liabilities—the pressure to pass a progressive income tax is only likely to continue. And in the meantime, the Civic Federation is recommending two other tax types: taxing retirement income in some way and expanded the sales tax to a slew of services. However, Chicago Magazine reports, though these suggestions are brought up again and again, they have not gained much traction among lawmakers. Neither Gov. Rauner or J.B. Pritzker are open to taxing retirement income, Rauner is against any kind of tax hike, and Pritzker has talked openly about opposing regressive taxes, including expanding the sales tax to services.