Naperville leaders favor flat income tax

April 15 is more than seven months away, but taxes were on the minds of politicians and business leaders Monday in Naperville as roughly 80 of them gathered for a debate about whether the state should switch to a progressive income tax system for individuals.

Hosted by the Naperville Area Chamber of Commerce, the debate featured opposing viewpoints from panelists brought together by Reboot Illinois, a nonpartisan organization that aims to encourage residents to act on issues such as taxes, jobs, schools and state debt.

Reboot Illinois expects income taxes to be an important topic during the next year as the income tax increase imposed in 2011 is set to expire Jan. 1, 2015. If the increase sunsets as planned, income taxes will drop to 3.75 percent for all taxpayers.

Switching to a progressive income tax system, one that taxes higher-income people at higher rates, would require a change to the state constitution — a long process that takes 3/5 majority approval in both state houses and approval by voters on a statewide election.

“Proponents of a progressive tax have quite an uphill battle before them,” said Matt Dietrich, executive editor of Reboot Illinois.

But those who support the change, like panelist Ralph Martire, executive director of the Center for Tax and Budget Accountability, say a progressive income tax would be fair, efficient, responsive to the economy and stable during tough times.

“If we really want to solve the problem, we have to modernize the tax code,” Martire said.

Many in the audience said they side with panelist Ted Dabrowski, vice president of policy at the Illinois Policy Institute, who argued in favor of retaining Illinois' flat income tax. Dabrowski said anyone in favor of a progressive tax is actually gunning for a tax increase, something he believes would hurt the state's economic outlook and job creation potential.

“We don't have a revenue problem — we have a spending problem and we have a waste problem,” Dabrowski said. “I don't believe anybody should give an additional penny to Springfield until they figure out reform” of systems like pensions and Medicaid.

State representatives in the audience including Republicans Mike Connelly, Darlene Senger and Jeanne Ives said Illinois should stick with a flat tax on individual income. Ives said taxing wealthier people at higher rates would send the wrong message and cause high-earning individuals and large corporations with easy mobility to leave the state. Senger said a change in the income tax system should not be considered in a vacuum, as Illinois residents also are burdened by property taxes to fund schools and other units of local government.

“The government is not a productive spender — you guys are the productive spenders,” Dabrowski told business leaders Monday. “You guys are the ones who can innovate and create wealth.”