After pension reform (we pray there is an “after”), the next tough decision facing Illinois lawmakers concerns the temporary income-tax increase that is supposed to end by 2015.
In 2011, a lame-duck General Assembly passed personal and corporate income-tax increases to help pay off a backlog of unpaid bills. The personal rate went from 3 percent to 5 percent. The corporate rate went from 4.8 percent to 7 percent. Funny, little progress has been made in paying off those overdue bills.
The choices that lawmakers in Springfield will face:
• Allow the increase to expire as scheduled and cut state spending by about $7 billion;
• Cast a politically risky vote to make the increase permanent;
• Or reform Illinois’ tax structure to create a progressive tax instead of the current flat tax.
In a flat income-tax structure, everyone pays the same rate. In a progressive – or graduated – structure, higher earners pay a larger percentage of their income than lower earners.
Some Democrats in Springfield are – not surprisingly – pushing for a progressive tax. However, any change from a flat tax would require amending the Illinois Constitution.
It’s hard to believe Illinois’ business climate and financial well-being could get worse, but a progressive tax would be a disaster for Illinois.
As state Rep. David McSweeney said: “It would be the final nail in the coffin for Illinois.”
A progressive tax would further drive businesses out of the state. It would make attracting talented people to take jobs in Illinois more difficult. It’s another way for our state government to take more hard-earned money from Illinois workers and small business owners.
North Carolina gets it.
Earlier this month, North Carolina lawmakers agreed to overhaul its tax structure by, in part, eliminating its progressive tax and adopting a flat tax. It reduces the state’s personal and corporate income-tax rates.
We support McSweeney’s effort to nip this progressive-tax talk in the bud. McSweeney, a Barrington Hills Republican, has introduced an anti-graduated income tax resolution (HR 241) in the House.
Republicans Tom Demmer of Dixon and Robert Pritchard of Hinckley have signed on as co-sponsors.
Lawmakers shouldn’t be looking at ways to get more money from Illinois taxpayers. They should be looking at ways to spend the revenue it does have coming in more wisely, and developing policy that makes the state more attractive to businesses, not less attractive.