85% of those who'd pay more under graduated income tax would be from Chicago and suburbs
Editor’s note: This story is part of an ongoing series about proposed changes in the state income tax formula.
When Gov. J.B. Pritzker unveiled his plan for a graduated income tax, he said just 3% of taxpayers would wind up paying more.
However, most of those who will pay more live in Chicago and the suburbs.
That's according to a Daily Herald analysis of income tax data provided by the Illinois Department of Revenue showing more than 85% of filers who would pay more under the proposal live in Cook, DuPage, Kane, Lake, McHenry and Will counties.
The graduated tax plan, endorsed by the Democratic governor and passed by the Democrat-controlled state Senate and a House committee, would raise tax rates on income above $250,000 while reducing taxes on lower incomes.
The change would generate $3.4 billion in new revenue, state officials have said.
Statewide, more than 5.6 million tax returns were filed in 2016 - the most recent year available - with 160,799 claiming income of more than $250,000. Taxpayers in Chicago and the suburbs filed 136,790 of them, according to the revenue department reports.
Proponents of the graduated income tax plan say only a small percentage of taxpayers hit that threshold - 3.6% of tax filers in the six counties in northeastern Illinois and 2.8% of all filers statewide. They say 97% of income taxpayers would either see a reduction or no increase in their taxes if the change is implemented.
"Gov. Pritzker ran on the notion of making our tax system fair and bring about a graduated system where you'd pay more if you made more," said Deputy Gov. Dan Hynes, the state's former comptroller. "He made it clear he didn't want the middle class paying more."
Under the graduated income tax plan that passed the House Revenue Committee on Friday, tax rates rise in steps, with the first $10,000 in income taxed at 4.75%, the next $90,000 taxed at 4.90%, and the next $150,000 taxed at 4.95% - the current rate under the flat tax.
Any income over $250,000 triggers a tax rate of 7.75%. The rate climbs to 7.85% for income over $350,000 for single filers and $500,000 for couples.
The biggest tax increase is single filers with income over $750,000 and married couples with incomes over $1 million. Their tax rate is 7.99%, and unlike people in lower income brackets, they would pay that flat rate on all of their income. Pritzker recommended a 7.95% flat tax rate on all filers whose income exceeds $1 million.
Hynes said it's not a surprise that Chicago and suburban taxpayers would be affected at a higher rate, noting there is a greater concentration of wealth in the Chicago metropolitan area.
Nearly 89% of all returns claiming more than $1 million of income in 2016 came from the six-county region, state revenue reports show.
Chicago and suburban taxpayers filed 15,775 tax returns with income of $1 million or higher in 2016, according to the state revenue data. In Cook County alone, there were 9,295 returns that exceeded the million-dollar threshold. Lake County had the highest concentration, with 2,729 returns making up almost 1% of the county's entire tax return filings. The revenue department reported 2,460 returns with income above $1 million in DuPage County, 530 in Kane County, 484 in Will County and 277 in McHenry County. The agency could not provide the amount of taxes paid or the total amount of income declared in those returns.
The Senate bill's top tax rate is slightly higher than in Pritzker's proposal and ramps up rates on single filers after $350,000 in income. Opponents immediately pounced on the shift.
"In my mind this shows folks they need to understand that the plan being put forth isn't what we're ultimately going to end up living under," said Andrew Nelms, state director of Americans for Prosperity, which opposes the graduated tax. "Recent events have illustrated those concerns."
Opponents have urged spending cuts and worry the tax relies too heavily on the state's richest residents.
Under both the Pritzker and Senate plans, anyone claiming more than $1 million of income would see an increase in taxes of about 60%.
Couples or individuals who report $150,000 of income would see at least a $65 reduction in tax compared to what they pay under the current flat tax.
Many filers who exceed the $250,000 threshold would see increases, and the extent depends on what plan is implemented by the state and how someone files.
A couple that files a tax return with $375,000 in reported income would pay an estimated $21,998 in taxes under both the Senate and Pritzker plans, about $3,435 more than they would with the current flat tax. Single filers would also pay that amount under Pritzker's plan, but under the Senate's plan a single filer would pay about $25 more.
Under Pritzker's proposal, someone filing a return with $1.5 million in reported income would pay $119,250 compared to $119,850 under the Senate's plan. Under the current flat tax rate of 4.95%, someone reporting $1.5 million pays $74,250 in income taxes.
There are still a number of hurdles for the graduated income tax plan to take effect. First, the House must approve a resolution to put the measure to voters. It requires three-fifths of the House to vote in favor of it. While Democrats have more than enough members to get it passed, support from some legislators has wavered in recent weeks.
But ultimately, more than 60% of voters in the Nov. 3, 2020, election would have to approve it since it's a constitutional change.
"This might be a tough sell for some voters," said Ralph Martire, executive director of the Center for Tax and Budget Accountability, a bipartisan government finance think tank based in Chicago. "A lot of people think they're going to be earning a lot more and worry about protecting their future interests, but they overestimate what their future income is going to be."
Where the higher payers would beThe graduated tax plan would raise rates on income over $250,000, and 85% of people reporting they make at least that much live in Chicago and the suburbs.
Location $250,000+ Total tax returns % affected
Cook County 74,652 2,318,073 3.2%
DuPage County 23,443 448,643 5.2%
Kane County 6,558 228,423 2.9%
Lake County 20,947 319,095 6.6%
McHenry County 3,532 146,587 2.4%
Will County 7,658 308,496 2.5%
Statewide 160,799 5,681,919 2.8%
Source: Illinois Department of Revenue (2016)