Despite mounting budget pressure, graduated income tax remains political long shot

When a progressive Chicago alderperson scolded Gov. JB Pritzker in November over his opposition to Mayor Brandon Johnson’s failed proposal to tax large corporations $21 per employee, Illinois’ billionaire chief executive was quick to defend his progressive bona fides.

“What we need is a progressive income tax, a graduated income tax in this state,” Pritzker told Chicago Ald. Byron Sigcho-Lopez, a democratic socialist who confronted him following a Veterans Day commemoration in Little Village. “You know that I’ve worked very hard to get that passed.”

Pritzker poured $58 million into the 2020 campaign advocating for a change in the state constitution to allow for an income tax structure that would charge higher rates for higher levels of income.

But the proposal received support from just 46% of voters, far below the threshold needed to change the state constitution.

In the years since, Pritzker and Democrats who control the state legislature have mostly shied away from the cause — all while managing to balance the books under the existing tax structure, largely thanks to a strong economy and federal aid in the years after the pandemic.

There are signs, however, that the state’s chronic fiscal challenges are reemerging and likely to be exacerbated by federal policy changes enacted by the Trump administration. Despite this, it appears the graduated income tax will also be off the table as a remedy, at least in 2026.

Pritzker, who put the “fair tax” at the center of his 2018 gubernatorial campaign and served as its chief champion during the failed 2020 referendum campaign, told reporters in November that putting the question on the ballot is “not something that's been a priority for me going into the next session.”

“I think it's something that is being talked about by members of the General Assembly — we'll have to see if it gets proposed,” Pritzker said, reiterating his belief that “a graduated system is better than a flat tax system.”

Pritzker is running for reelection in 2026 and is widely viewed as a potential Democratic candidate for president in 2028.

Renewed push

While Pritzker isn’t putting it at the top of his agenda, some Democrats in the legislature would like to again place a graduated income tax question before the voters.

State Sen. Rob Martwick of Chicago introduced legislation in both 2023 and 2025, and the latest proposal has 17 co-sponsors. Similar legislation filed in the House by state Rep. Abdelnasser Rashid, a Bridgeview Democrat, has more than two dozen co-sponsors.

The deadline for lawmakers to pass a resolution to place an amendment on the 2026 ballot is May 3.

“I feel like there is this huge appetite for some sort of restructuring of our tax system to make it less regressive (and) to provide relief to middle and working class people,” Martwick told Capitol News Illinois.

But Republicans and the state’s business community have long opposed the idea. The 2020 initiative was in part torpedoed by a relentless $60 million ad campaign mostly funded by billionaire Ken Griffin, the state’s wealthiest resident at the time.

According to the governor’s budget office, the state is facing a $2.2 billion budget deficit next fiscal year — a number that could grow to more than $5 billion by 2031. The numbers are based on current law, meaning they assume no new spending or tax increases.

‘The party’s over’

When the graduated tax amendment failed in 2020, Pritzker lashed out at Republicans and the business community, declaring state tax policy “at a crossroads” and warning “there will be cuts, and they will be painful.”

But with boosts from federal stimulus funds and increased tax receipts spurred by post-pandemic economic activity, Pritzker and state lawmakers have been able to enact balanced budgets in all but one of his seven years in office, with COVID-impacted 2020 the outlier. And the state has paid off a backlog of bills that had ballooned to more than $16 billion during the height of a state budget impasse a decade ago.

But that boon is over. The past two years, lawmakers had to enact a series of tax hikes and other revenue enhancements to keep the budget balanced.

“The party's over,” said Ralph Martire, the executive director of the Center of Budget and Tax Accountability. “And the party's over because Illinois' long-term structural problems in their fiscal policy have never been resolved. So the state's tax policy doesn't work in a modern economy.”

He argues it is simple math — the state needs to capture revenue in growth areas. And in the decades since Illinois enacted an income tax, income has increased most among the state’s wealthiest residents.

Another proposed amendment being floated by former Democratic Gov. Pat Quinn would place a 3% surcharge on income over $1 million. The tax would raise an estimated $4.5 billion and be set aside for property tax relief. Quinn’s effort comes after 61% of Illinois voters signaled support for the idea when asked in an advisory referendum question on the 2024 ballot.

Like the graduated plans already proposed, Quinn’s plan would have to receive three-fifths support in the legislature to get on the 2026 ballot.

Lawmakers could also take an approach that wouldn’t require a constitutional amendment. Instead, it would involve raising the flat income tax rate while also upping refundable tax credits for low- and middle-income taxpayers.

Martwick said that would be “an acceptable Plan B,” but thinks “we should always try for the best policy first.”