How to calculate your taxes under Pritzker's plan

 
 
Updated 3/8/2019 10:50 AM

It takes a little bit of math to figure out how Gov. J.B. Pritzker's graduated income tax proposal will affect Illinois workers.

If passed by lawmakers and then by voters in 2020, the proposal would replace the state's current 4.95 percent flat rate with one that applies different rates on various segments of workers' income.

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Under the proposal announced Thursday by Pritzker, any income tax return filed individually or jointly claiming $250,000 or less in taxable earnings would see a reduction of up to $65 in the amount of taxes owed compared to the existing flat tax.

Here's how the plan works:

• The first $10,000 in net income is taxed at 4.75 percent, resulting in a maximum $475 in income taxes.

• For the next $90,000 in income a 4.9 percent rate is applied, resulting in up to $4,410 in taxes. People claiming $100,000 a year would pay $4,885, $65 less than what they pay under the current income tax law. The average annual income in Illinois is a little more than $56,000, according to the U.S. Bureau of Labor Statistics.

• The next $150,000 of income is taxed at 4.95 percent, which adds up to another $7,425 more in taxes. Someone claiming $250,000 a year in taxable income would owe $12,310, also $65 less than under the current law. More than 97 percent of all income tax returns filed in Illinois claim income of $250,000 or less, according to Pritzker.

• The tax rate jumps all the way up to 7.75 percent for the next $250,000 of income, which could amount to as much as $19,375 more in income taxes. People claiming $500,000 in income would owe $31,685, which is $6,935 more than what they would pay with the current flat income tax rate.

                                                                                                                                                                                                                       
 

• A 7.85 percent tax rate is applied to the next $500,000 of income, adding up to $39,250 more in income taxes owed. Someone who claims $1 million in earnings would be on the hook for $70,935 in income taxes. That same million dollars currently generates $49,500 in income tax revenue for the state, a difference of $21,435.

• For the 0.3 percent of income tax returns filed with the state claiming earnings over $1 million, Pritzker's plan calls for a flat 7.95 percent tax rate applied to the entire amount. Someone with taxable earnings of $1,000,001 would pay $79,500.

All told, the changes to the income tax law are expected to generate roughly $3.4 billion more in tax revenue annually.

Retirees would not be affected because Illinois is one of the few states that doesn't tax retirement benefits. Estimates in 2017 indicated the state could generate $2.7 billion by taxing retirement benefits at the same rate workers' income is currently taxed.

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