State Senate approves constitutional shift to graduated income tax
The Illinois state Senate voted today to eliminate the constitutional requirement of a flat income tax.
The vote passed 40-19 along strict party lines in the Democratically controlled chamber.
It was one step needed for a graduated income tax that supporters argue will generate an additional $3.4 billion a year in revenue.
The House will have to approve the bill by a similar three-fifths supermajority vote, and then more than 60% of Illinois voters also must approve the change at the November 2020 election.
Senators also approved a series of rates at various levels starting at 4.75% on the first $10,000 of income and 7.99% at the highest end, which would be on all income for single filers whose earnings exceed $750,000 and all income of joint filers whose earnings exceed $1 million.
The current flat tax rate for everyone is 4.95%
The vote on rates was 36-22.
Hawthorn Woods Republican state Sen. Dan McConchie voted against the bill, as most GOP senators did, and said it will be easier for legislators to make changes to the income tax law if ultimately enacted because it will require only a simple majority vote in the future.
"As soon as we implement a graduated tax system, we make it easier to raise those rates and change those brackets going forward," McConchie said.
The rates approved are also somewhat different from what Gov. J.B. Pritzker pitched months ago when he introduced plans for a graduated income tax that topped out at 7.95% for all income over $1 million.
The Senate plan also changes the rate on income between $350,001 and $750,000 for single filers as well to 7.85%. Pritzker's plan called for the rate on income in excess of $500,000.
The corporate income tax would also increase to 7.99%. Pritzker proposes 7.95%.
The Senate also voted to eliminate the "estate tax" on inheritances as part of the graduated income tax plan. The tax generates roughly $305 million a year and wouldn't be eliminated unless voters approve a graduated income tax next year.
McConchie also expressed concerns that there is nothing preventing the legislature from bringing the tax back at a later date.
Another approved bill would freeze school district property tax rates if voters approve the graduated tax and the state makes all of its promised payments. But this may not have much effect on taxpayers whose property values increase.
Democrats still called the vote a win.
"I'll take what I can get right now, since we've been trying every year to get something like this done down here," said state Sen. Tom Cullerton, a Villa Park Democrat. "We're trying to win some property tax relief one little bit at a time."
The legislation now goes to the House for a full vote, which could take anywhere from three days to weeks from now. The rates, estate tax and property tax rate freeze all require Pritzker's signature, while the constitutional amendment change does not.