A constitutional amendment to deliver property tax relief for Illinois homeowners

Illinois is a high-tax state for working families and a low-tax state for wealthy households.

This is because Illinois has a regressive tax system. Working and middle-class families pay a higher share of their incomes toward state and local taxes than those who earn over $1 million per year. They pay 12 times more in property taxes alone. And yet it was millionaires who recently got $66,000 in additional federal tax cuts in the so-called “One Big Beautiful Bill Act.”

Less than 1% of Illinois’ taxpayers earn more than $1 million per year. But that number grew by 36% between 2019 and 2023, four times the rate of growth of those earning between $50,000 and $100,000. Millionaires also have seen their inflation-adjusted incomes double over the past four decades while take-home pay has been stagnant for everyone else.

To create more balance to our state tax code and a little relief for middle class families struggling with disproportionately high tax burdens and even higher costs, state lawmakers have debated whether to implement a 3% surtax on net income over $1 million. On two separate occasions since 2014, overwhelming majorities of Illinois voters passed non-binding “advisory referendums” in support of such measures, which proposed spending proceeds on either reducing property taxes or funding public schools.

A new report from the Illinois Economic Policy Institute and the Project for Middle Class Renewal at the University of Illinois has sought to quantify the potential impacts of these proposals, finding that they could deliver property tax cuts as high as 20%, fully resource our state’s evidence-based funding model, and provide a needed boost to the economy.

The mechanics of a “millionaires’ tax” are simple. It’s a 3% surcharge on net income earned above $1 million in a calendar year. Currently, this would only affect 40,000 Illinois households. It would generate $4 billion annually that could be constitutionally “lock-boxed” and dedicated to priorities like lowering property taxes or increasing support for schools.

The analysis finds that a millionaires’ tax would enable the state to send $1,500 rebates to every single homeowner with a primary residence in Illinois — a 20% property tax cut for the average homeowner.

Alternatively, the new revenue could be used to fully fund every school district, improving class sizes, lifting graduation rates, and stemming property tax growth. Or it could be used to freeze the property tax levies that schools rely on at current rates for about a decade. This is equivalent to a 12% tax cut by 2035.

Each approach would put more money in the pockets of working families, who drive spending at local establishments. The data shows this would boost the economy by up to $4 billion and create as many as 25,000 additional jobs.

Illinois is not the only state to consider a millionaires’ surtax. Washington just passed a measure that will go into effect in 2028, joining four states that already have one in place. In other states, they generate billions of dollars each year for schools, community colleges, infrastructure, and health care.

As with any type of policy change, it’s important to assess the possibility of unintended negative impacts, such as whether this reform would result in millionaire migration out of state or cause headwinds for the economy.

The data reveal that it would not. The economies of states with millionaires’ taxes grow just as fast as those in states without the policy, and these levies have not caused a mass exodus anywhere. Instead, research shows that millionaires are more likely to have children and business ties in their states — so they move at lower rates than the overall population.

On taxes, it’s easy to get distracted by political noise and partisanship.

That’s why it’s important to understand what the data and existing real-world examples reveal. And they show that the proposals currently on the table in Illinois would yield an objectively fairer tax system, substantial tax cuts for millions of middle-class households struggling with rising costs, more investment in public schools, and a boost to the state’s economy.

• Frank Manzo is an economist at the nonpartisan Illinois Economic Policy Institute. Learn more at https://www.illinoisepi.org/.