Reeder: Progressive tax not about fairness
SPRINGFIELD – Hang on to your pocketbooks, the politicians are getting restless.
They want more of your money. Never mind that the Illinois Legislature jacked up your taxes by 67 percent in 2011.
Because of this temporary tax hike, many of us are now paying a full 5 percent of our income to Springfield. At least the bulk of this tax increase is set to expire in January.
Now they are looking at another tax grab, and this time they are doing it under the guise of “fairness.”
Government worker unions and their political allies are pushing hard for a graduated, or progressive, income tax. What this would mean is that instead of everyone paying the same percentage of his income to the state, the percentage would stair step up as a person earns more money.
Supporters of this idea face a big obstacle: the Illinois Constitution.
The constitution mandates that the state levy the same percentage rate from all taxpayers. So there is a push now to have the Legislature put a measure on the November ballot creating a progressive income tax.
You’ll hear some malarkey about this being about fairness.
Don’t believe it. It’s about money, plain and simple.
The state is looking for ways to collect more, but the politicians can’t just come out and say that so they are using code words like “equitable” or “fair.”
The fact of the matter is, the state already has a progressive income tax. Don’t believe me?
Well, just consider these numbers:
• A household earning $15,000 in Illinois pays on average 1.9 percent of its income to the state.
• A family earning $30,000 pays 2.9 percent.
• A taxpayer earning $75,000 pays 3.8 percent.
What’s happening here is something called the earned income tax credit.
We could get into a long discourse on whether it is good public policy or not. I have my reservations. Regardless, Illinois already has a means to give tax breaks to lower-income people and has been employing it quite aggressively for many years.
So this progressive income tax isn’t about giving relief to poor folks – it’s about making middle-class and upper-income people pay more.
In January, the state income tax rate is slated to drop to 3.75 percent from its current temporary level of 5 percent. But guess what? Under a proposal by state Rep. Naomi Jakobsson, D-Champaign, every Illinois family earning $18,000 or more would pay a top rate of 4 percent or more.
I’ve never considered a household making $18,000 per year to be rich. But under Jakobsson’s plan, those families would pay a higher rate next year than they otherwise would. Of course the earned income tax would apply for some of these folks, but still, that’s a pretty low level to start imposing a higher rate.
Her plan also calls for every family earning more than $58,000 to pay a top rate of 6 percent, which is a higher top rate than the current temporary top rate.
And the rates keep ratcheting up from there to a full 9 percent.
In fairness, that is only one of the proposals involving a progressive income tax. We really don’t know where the Legislature would set the rates – and whether the voters will give them permission by amending the state constitution.
If other states are any guide, a progressive income tax means a greater burden for middle-class families. Missouri imposes its highest rate on families earning more than $9,000. Our neighbor to the west, Iowa, kicks in its highest rate for families making $67,230. Kentucky kicks in its top rate for those families making $75,000.
We aren’t talking about Rockefellers or Vanderbilts here.
A progressive tax isn’t about tax relief for the poor – we already do that through the earned income tax credit.
It’s about collecting more money from more people, folks like you and me.
• Scott Reeder is a veteran statehouse reporter and the journalist in residence at the Illinois Policy Institute. He can be reached at firstname.lastname@example.org.