The Illinois House, on partisan lines, voted to approve a constitutional amendment to ask voters in 2020 if the flat tax structure should be removed from the constitution.
Landing Gov. J.B. Pritzker a huge win, the Illinois House — on strictly partisan lines — on Memorial Day passed a constitutional amendment that will land a question on the 2020 ballot to change the state’s income tax structure.
The Illinois House voted 73-44 to approve the constitutional amendment.
With the Illinois Senate approving the amendment on May 1, the House passage means voters will be asked if they want to change the state’s flat tax structure to a graduated income tax — in which high earners will pay more. The flat rate language has been part of the state’s constitution since 1970, a year after the income tax was first enacted. The amendment does not require the governor’s approval.
The referendum would need the support of 60 percent of voters for the change to take effect.
A corresponding measure that sets the tax rates is still making it through the Illinois House.
Monday’s passage sets the start button on a lengthy public campaign leading up to the referendum, full of big money efforts via two dark money groups.
Illinois House Speaker Mike Madigan, D-Chicago, called the vote a “major step toward a stronger Illinois,” while warning there is “more work to be done.”
“Middle-class families bear too much of the burden under the current tax system, and a Fair Tax will enable us to make the wealthy pay their fair share to balance the budget and invest in critical resources like education and health care — all while providing relief for 97% of taxpayers,” Madigan said in a statement.
At a press conference after the passage, Pritzker, surrounded by Democratic supporters, called the passage “a giant leap forward for the middle class,” while also announcing his blessings for a “bipartisan and bicameral property task force” to try to come up with property-tax relief solutions.
The amendment’s sponsor, state Rep. Robert Martwick, D-Chicago, called the state’s current system “a very unfair tax system.” He countered opponents’ claims about Illinoisans and businesses leaving the state: “This is reform. This is an opportunity to fix the problems of Illinois.”
“The fair tax, if approved by the voters, if they choose this tax reform, this path forward for Illinois, we will be in a position where we can eliminate those deficits,” Martwick said. “And when we eliminate those deficits, we stop accumulating debts and we begin to pay them down. And when we pay down those debts we relieve the pressure for future tax increases.”
All 44 House Republicans put their lights on to speak during a lengthy debate on the floor on Monday afternoon, which began about 1 p.m and lasted until 4:30 p.m. The debate was much, much longer than the Senate debate — which clocked in at seven minutes.
Illinois House Republican Leader Jim Durkin called the vote “a foregone conclusion” and “the end result of the Illinois Democrats’ historical, reckless, irresponsible budgeting and spending.”
“Please think about how repeating the same foolish tax-and-spend policies will not change anything about our future,” state Rep. Margo McDermed, R-Mokena, said. “We need to address the underlying drivers and we need to get our financial house in order, and this amendment does none of those things.”
Several Republicans called it a “jobs tax,” a tax change that will drive more people out of Illinois and a problem of trust.
“This plan will not work. Do we need tax reform? You bet we do. This isn’t the way to do it,” state Rep. Steve Reick, R-Woodstock, said. “We need a global review of our entire tax system … with an operating system that tracks our economy, that doesn’t create class envy and class warfare and take money from those who are the most productive in our society. We need a tax system that tracks our economy.”
Ideas Illinois, a dark money group working to fight the graduated income tax, called the passage “a blank check for the politicians in Springfield signed by Illinois families.”
“Speaker Madigan and Governor Pritzker will say a lot in the months ahead, but what they won’t tell voters is that those states who have passed similar methods of taxation have seen job creators flee in droves and passage of this tax will be one more nail in the coffin of the Illinois economy,” Ideas Illinois Chairman Greg Baise said in a statement.
Pritzker’s dark money group, Think Big Illinois, called the passage “a great day for Illinois voters, who will now have the opportunity to decide on the ballot on November 2020 if they want a tax system that works for everyone, not just the wealthy few.”
A House committee last week cleared the tax rate measure, which would raise the top income tax rate to 7.99 percent — up from Pritzker’s preferred 7.95 percent. It also separates rates for single and joint filers, an issue many brought up when Pritzker unveiled his preferred rates in March. The corporate tax rate within the package would also be raised to 7.99 percent.
Under current law, all personal income is taxed at 4.95 percent and corporate income at 7 percent.
Democrats have said the new personal income tax rate would bring in $3.57 billion, and the new corporate tax rate would bring in $350 million.
While many lawmakers believed the House would clear the amendment, it’s unclear whether lawmakers will approve the two other measures amid concerns over the lack of property tax relief. And sponsor state Rep. Mike Zalewski, who chairs the House Revenue and Finance Committee, said there’s support for a task force to discuss property tax relief this summer.
Pritzker’s plan, unveiled in March, proposed dropping the personal tax rate for the first $10,000 of income for single and joint filers to a 4.75 percent rate; income above $10,000 to $100,000 would be taxed at 4.9 percent; income between $100,000 and $250,000 would be taxed at 4.95 percent; income between $250,001 and $500,000 would be taxed at 7.75 percent; and income from $500,001 to $1 million would be taxed 7.85 percent. Income over $1 million would be taxed 7.95 percent.
Pritzker had said he wants a progressive income tax approved before the Illinois General Assembly adjourns in May. Pritzker’s office has framed the tax change as a way to generate $3.4 billion in additional revenue, while noting that 33 other states have enacted a graduated income tax structure.