Progressively worse: Pritzker's tax push has a dangerous precedent

  • Austin Berg

    Austin Berg

 
By Austin Berg
Guest columnist
Posted3/8/2019 1:00 AM

Gov. J.B. Pritzker took his first steps toward axing Illinois' flat income tax protection this week. His administration began building a roll call on what will be one of the toughest Statehouse votes in years, with the House of Representatives as the battleground.

But the last state to take Pritzker's path should serve as a bright red flag to Illinoisans weighing whether to back him.

                                                                                                                                                                                                                       
 

Only one state has adopted a progressive income tax in the past 30 years: Connecticut. The Nutmeg State switched away from a flat income tax in 1996, phasing in the progressive tax over three years. Politicians there made all the same promises that some Illinois politicians, including Pritzker, are making today.

First, they said the middle class would see a tax cut. Second, they said a progressive tax would ease the property tax burden. Third, they said it would stabilize state finances. And finally, they said it would help the poor and disadvantaged.

The results are in.

The typical Connecticut household has seen a 13 percent hike in their income tax rates since 1999, when the progressive income tax was fully phased in. Property taxes as a share of income are up more than 35 percent. The state has faced a budget deficit in 12 of the past 15 years. And Connecticut saw a 47 percent jump in the poverty rate while the rest of the nation saw a dip.

The state also has one of the nation's heaviest debt loads and an outmigration problem. Starting to sound familiar? In short, every political promise about switching to a progressive income tax in Connecticut was broken. Illinoisans have no reason to believe Pritzker's will be any different.

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In more recent history, states have been moving in the opposite direction when it comes to their income tax structure.

Just last year, neighboring Kentucky swapped six progressive income tax brackets for a flat income tax. Iowa consolidated nine income tax brackets into four. Missouri cut its corporate income tax, as did Indiana. And Colorado voters rejected a progressive income tax at the ballot box.

In 2013, North Carolina ditched its progressive income tax and replaced it with a flat income tax. Former North Carolina state Rep. Ken Waddell, a Democrat, voted in favor of the change. I asked him six years later what he thought of the move.

"I do think it made the state more attractive," he said. "It was a talent draw. I think it made [the state] more attractive for people to come in for jobs and it accelerated things."

The data back him up. Prior to the tax change, North Carolina's economic growth was lagging the national average. After the tax change, North Carolina's economic growth zoomed past the national average. Its annual wage growth doubled, also far outpacing the national average.

                                                                                                                                                                                                                       
 

North Carolina's rebound was no surprise. States without a progressive income tax see faster jobs growth, wage growth and GDP growth than states with a progressive income tax.

With Illinois already close to the back of the pack nationally for jobs growth and income growth, Illinois families seeking opportunity can't afford what Pritzker is pushing.

Ultimately, a progressive income tax in Illinois has nothing to do with fairness, competitiveness or tax cuts. It is another way to mask the state's structural spending problems and delay difficult decisions, ultimately ending in higher taxes on the middle class. Connecticut was the same.

And if Illinois taxpayers sit on their hands -- if they don't reach out to their lawmakers to express where they stand on this issue -- they will find themselves on the same treacherous path.

Austin Berg, aberg@aillinoispolicy.org, is a writer for the Illinois Policy Institute.

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