By Jamey Dunn
Two legislative efforts to get proposed constitutional amendments on the ballot failed today.
The push for a constitutional amendment that would allow a graduated income tax fell flat today. To meet the deadline to get the amendment on the November ballot, the Senate would have had to have approved it today. Democratic Sen. Don Harmon, who is the sponsor of Senate Joint Resolution Constitutional Amendment 40, said he had the votes in his chamber. But Harmon of Oak Park said he did not want to call upon his colleagues to take a tough vote if it seemed that the measure had no chance of passing in the House. “I have said from the get-go, I want to make sure the reception in the House is a warm one, and we want to make sure we have the votes lined up in the House,” Harmon said today.
Opponents of the amendment dub it a tax increase because graduated rates, which are in a separate bill, proposed by Harmon and other backers, assume that the temporary income tax rates would become permanent. The amendment itself would not affect rates but would only allow for a graduated income tax. Currently, the state’s Constitution calls for a flat tax.
Supporters of the plan filled the capital rotunda today, chanting, “We want a fair tax.” Harmon lobbied House members and called on the Senate not to adjourn when it broke for committees in the afternoon, giving him more time to try to round up the votes needed. But in the end, it was not enough and the Senate adjourned this evening without taking a vote on the amendment.
The proposal faced an uphill climb in the House from the beginning of session. Republicans have been outspokenly opposed to the plan and it would have needed support from every Democrat in the chamber to pass. Marengo Democratic Sen. Jack Franks signed on to a resolution opposing a graduated income tax, and House Speaker Michael Madigan told reporters recently that the amendment was far from having the support it needed to pass in the chamber.
Meanwhile, a proposal from Senate Minority Leader Christine Radogno to impose term limits on constitutional officers failed to get the support needed to make it out of committee today. Radogno said that her position on term limits has “evolved” over time as she has become frustrated with conditions in Illinois. “The public is clamoring for change. They want new ideas. They want new faces,” she said. Democrats on the committee chided Radogno for introducing the proposal so close to the deadline to get amendments on the ballot. Radogno filed her resolution last week. Additional session days would have to have been scheduled to meet the necessary timeline if the amendment had moved forward. But Radogno said that if Democrats were interested in passing it, there was still enough time left.
Republican candidate for governor Bruce Rauner is backing a push to put a constitutional amendment for legislative term limits on the ballot through a citizen initiative. The Committee for Legislative Reform and Term Limits, which has Rauner as its chairman, plans to turn its signed petitions in tomorrow. Yes for Independent Maps, a group spearheading a citizen initiative campaign for an amendment that would change the way legislative districts are drawn in the state, plans to turn in its petitions on Thursday. If the signatures are approved by the State Board of Elections, both proposed amendments would likely face court challenges before they would reach the ballot.
Showing posts with label graduated income tax. Show all posts
Showing posts with label graduated income tax. Show all posts
Tuesday, April 29, 2014
Monday, April 28, 2014
Senate waiting for House support on graduated income tax vote
By Jamey Dunn
Democratic leaders in the Senate do not plan to move forward with a graduated income tax proposal unless there is indication that plan could pass in the House.
Senate President John Cullerton said that he is supportive of the proposed constitutional amendment. But he said he plans to “wait and see” what the House does on the issue because it likely has less support in that chamber. A spokesperson for Cullerton later clarified that he would consider a vote if there was indication that the House would approve the measure.
Oak Park Democratic Sen. Don Harmon, who sponsors the amendment, reportedly planned to call it for a vote this week. Supporters of the amendment are almost out of time. For Harmon’s Senate Joint Constitutional Amendment Resolution 40 to make it to the ballot under the current legislative schedule, it would need to pass in the Senate tomorrow and in the House on Thursday. The final deadline to approve constitutional amendments is May 4, but as of now, both chambers are scheduled to wrap us session this week on Thursday.) Harmon was not available for comment.
Constitutional amendments require the backing of three-fifths of both chambers. House Speaker Michael Madigan told reporters last week that a progressive income tax amendment was “significantly short” of the support needed to pass in the House. The proposal has no public support from Republicans, so all the Democrats in the House would have to vote for it. Rep. Jack Franks, a Democrat from Marengo, is a cosponsor of a resolution opposing a graduated income tax. There is a graduated income tax amendment in the House, too. But it is not as far along in the process as the Senate amendment after it failed to make it out of the House Revenue and Finance Committee in March.
Cullerton said today that his chamber would also take a wait-and-see approach on extending the current income tax rates. “We have two different budgets that we are contemplating.” Cullerton said one version includes an extension of the current rates. The other would allow the tax increase to begin its sunset in 2015 and would require substantial cuts. He said that since Madigan is still working to get the votes for it in the House, a tax rates extension should start in that chamber. “We will wait and see which of the two budgets we have to work with.” When asked if Democrats could vote in favor of the cuts that would be needed to allow the income tax rates to go down, Cullerton said: “It will be difficult, but we have to pass a budget.”
As lawmakers head into the last month of spring session, which ends at midnight on May 31, Cullerton says he hopes that the support can be mustered to pass an increase in the state’s minimum wage. He said that he thinks there is broad backing among voters for such and increase. “Now, the question is whether or not we have the votes for it here.” Madigan said last week that he is also still working to round up the votes needed to pass a minimum wage increase. A possible plan B of putting the issue to voters through a nonbinding referendum has also been floated. If the majority of voters cast a ballot in favor of a minimum wage increase as part of an advisory referendum, it would not actually change wages in the state. But the results of such a vote might help those in favor of an increase in their lobbying efforts. “We’re going to try to see if we can pass the bill, and if we’re short maybe we need to get public input through a referendum question. That would be an alternative if we don’t have enough votes to pass it,” Cullerton said.
Democratic leaders in the Senate do not plan to move forward with a graduated income tax proposal unless there is indication that plan could pass in the House.
Senate President John Cullerton said that he is supportive of the proposed constitutional amendment. But he said he plans to “wait and see” what the House does on the issue because it likely has less support in that chamber. A spokesperson for Cullerton later clarified that he would consider a vote if there was indication that the House would approve the measure.
Oak Park Democratic Sen. Don Harmon, who sponsors the amendment, reportedly planned to call it for a vote this week. Supporters of the amendment are almost out of time. For Harmon’s Senate Joint Constitutional Amendment Resolution 40 to make it to the ballot under the current legislative schedule, it would need to pass in the Senate tomorrow and in the House on Thursday. The final deadline to approve constitutional amendments is May 4, but as of now, both chambers are scheduled to wrap us session this week on Thursday.) Harmon was not available for comment.
Constitutional amendments require the backing of three-fifths of both chambers. House Speaker Michael Madigan told reporters last week that a progressive income tax amendment was “significantly short” of the support needed to pass in the House. The proposal has no public support from Republicans, so all the Democrats in the House would have to vote for it. Rep. Jack Franks, a Democrat from Marengo, is a cosponsor of a resolution opposing a graduated income tax. There is a graduated income tax amendment in the House, too. But it is not as far along in the process as the Senate amendment after it failed to make it out of the House Revenue and Finance Committee in March.
Cullerton said today that his chamber would also take a wait-and-see approach on extending the current income tax rates. “We have two different budgets that we are contemplating.” Cullerton said one version includes an extension of the current rates. The other would allow the tax increase to begin its sunset in 2015 and would require substantial cuts. He said that since Madigan is still working to get the votes for it in the House, a tax rates extension should start in that chamber. “We will wait and see which of the two budgets we have to work with.” When asked if Democrats could vote in favor of the cuts that would be needed to allow the income tax rates to go down, Cullerton said: “It will be difficult, but we have to pass a budget.”
As lawmakers head into the last month of spring session, which ends at midnight on May 31, Cullerton says he hopes that the support can be mustered to pass an increase in the state’s minimum wage. He said that he thinks there is broad backing among voters for such and increase. “Now, the question is whether or not we have the votes for it here.” Madigan said last week that he is also still working to round up the votes needed to pass a minimum wage increase. A possible plan B of putting the issue to voters through a nonbinding referendum has also been floated. If the majority of voters cast a ballot in favor of a minimum wage increase as part of an advisory referendum, it would not actually change wages in the state. But the results of such a vote might help those in favor of an increase in their lobbying efforts. “We’re going to try to see if we can pass the bill, and if we’re short maybe we need to get public input through a referendum question. That would be an alternative if we don’t have enough votes to pass it,” Cullerton said.
Friday, April 25, 2014
What to watch: budget edition
By Jamey Dunn
Illinois lawmakers have had a two week break from the capitol, but they are scheduled to be back in session on Tuesday. As those who watch the legislature closely know, the action typically doesn’t truly get geared up until this point. But soon enough we will be immersed in the blur of activity that is May at the Statehouse. Here are some things to watch for on the budget front.
The General Assembly has until midnight on May 31 to approve a budget with a standard majority. After that time, any bills passed require a three-fifths majority to have an immediate effective date. Crafting a budget is not going to be easy this year. The temporary income tax approved in 2011 is set to begin its phaseout in the second half of Fiscal Year 2015. For months, heads of state agencies, lobbyists, public university presidents and others have come before budget committees to lay out what they say would be the dire consequences of the cuts that would be needed if the tax rates drop. Mass layoffs, facility closures, threats to public safety, spikes in K-12 class sizes and deep cuts to programs that provide care to seniors or children, have all been cited in the doom and gloom presentations.
Meanwhile, Republicans argue that the state’s budget outlook is being framed as worse than it really is. They say that Democrats are pushing a doomsday version of the budget to lay the ground work for making the temporary income tax permanent. “The Democrats’ approach this entire spring has been to try to create as dire a picture as possible,” said Palatine Sen. Matt Murphy. “You can make it a lot more plausible that you can fund core services and still allow the tax rate to go back down as the Democrats promised it would, but they don’t want people to see that. They don’t want that argument out there because they want to continue to get the money that they’ve been getting.” Democrats passed the increase without Republican support in 2011. It seems likely that if the want to extend the rates, they will have to go it alone again. House Speaker Michael Madigan told reporters this week that the votes aren’t there to pass it in his chamber. He said that extending the tax would be a “difficult role call.” “Every person in the legislature is going to be called upon to make a budgetary decision — either a reduction budget or an as-is budget or a slight-increase budget,” Madigan said. “And they’ll be called upon to vote for the money to support the budget that they want.”
Gov. Pat Quinn advocated for extending the current rates in his budget address. He also wants to give homeowners a $500 tax credit that he has dubbed property tax relief. Madigan and Senate President John Cullerton quickly backed the governor’s call for keeping the current rates.
A potential extension of the income tax rates is not the only tax talk legislators are going to have in the coming weeks. The sponsor of a proposal to allow the state to have a graduated income tax has said he plans to call his proposal for a vote next week. Oak Park Democratic Sen. Don Harmon’s Senate Joint Constitutional Amendment 40 would overturn the current provision in the state’s Constitution that requires Illinois to have a flat income tax. The plan would not set the rates for such a tax, but Harmon and other supporters have issued proposed rates framework. If the amendment makes it through both chambers, it would appear before voters on the general election ballot. But that seems unlikely. Harmon may be able to get the amendment through the Senate, but Madigan said that it is “significantly short” of the support needed to pass on the House. Two constitutional amendments — one that would voters from discrimination and another that would strengthen the role of victims in the judicial process — have already been approved by lawmakers and will appear on the November ballot.
Proposed tax changes relating to business in the state could also be on the way. A House committee has been focusing on the tax climate faced by Illinois businesses. The group has been taking testimony on the issue for months, but has yet to publicly present any ideas.
Before the break, a Senate committee approved a plan to change the way that the state funding is doled out to schools. Senate Bill 16 would focus more heavily on the financial need of districts. The proposal would also eliminate the individual block grant that is given to Chicago schools, something Republicans on the committee have supported. The plan would also require more spending transparency at the district level. The committee debate became heated when Republicans accused sponsor Sen. Andy Manar, a Bunker Hill Democrat, of rushing the process. The Illinois State Board of Education is working to produce numbers that would show how the changes in SB 16 would affect each school district. Republicans say that they do not want to vote on the plan until they have that information.
Manar said that lawmakers from both parties agree that the current funding formula does not work. “The idea that we can have a few premier school districts in the state that exceed every expectation ... and have an incredible number that lag behind and call that a win in the state system is not a win in my book.” The ideas behind the legislation came from a report complied by a bipartisan committee that spent more than a year considering the topic. However, Republicans say they were not involved in drafting SB 16. Manar hopes that there will eventually be bipartisan support for the bill. He says he introduced it when he did to spur debate. “We could have waited until the last week of May, negotiated behind closed doors, popped a bill out and then had a vote. That’s not the way to do this,” Manar said.
A gaming expansion always seems to be on the table as the end of spring session nears. But getting it done is a difficult task. Putting together a bill that will make all the powerful groups involved happy, or at least not irate, is a balancing act, so is figuring out how to spread around the potential revenues in a way that will please or at least appease lawmakers. And even when gambling expansions have passed, Quinn has vetoed them. This time around, the governor has made some positive comments about expanding gambling. “You’ve got to have strong ethical standards, and I think they need to be enforced, and it has to be done by the independent Illinois Gaming Board,” Quinn told reporters in early April. “I think we have kind of ironed that out. I think we’re on the right path.” The governor has said in the past that he would not support an expansion unless the revenues went to fund education.
Blue Island Democratic Rep. Robert Rita is sponsoring a bill that would allow for the creation of new casinos, including one in Chicago, and slots at horse racing tracks. However, when compared to past proposals, Rita’s bill would scale back the number of slot machines racetracks could have. Rita has another version that would only create a Chicago casino. The racing industry opposes both. It also seems that Chicago Mayor Rahm Emanuel will not throw his weight behind a Chicago casino plan at this point. Emanuel is echoing past statements from Quinn, saying that he will not focus on a casino until the city’s underfunded pension systems are addressed. The General Assembly already approved changes to the systems for city workers. Emanuel also wants changes to stabilize the systems for teachers, police officers and firefighters. Before they passed changes to the state’s pension systems, Quinn warned lawmakers not to be distracted by the “shiny” object of gaming legislation.
Check back for a guide on bills to watch as legislators make the final push toward the end of spring session.
Illinois lawmakers have had a two week break from the capitol, but they are scheduled to be back in session on Tuesday. As those who watch the legislature closely know, the action typically doesn’t truly get geared up until this point. But soon enough we will be immersed in the blur of activity that is May at the Statehouse. Here are some things to watch for on the budget front.
The General Assembly has until midnight on May 31 to approve a budget with a standard majority. After that time, any bills passed require a three-fifths majority to have an immediate effective date. Crafting a budget is not going to be easy this year. The temporary income tax approved in 2011 is set to begin its phaseout in the second half of Fiscal Year 2015. For months, heads of state agencies, lobbyists, public university presidents and others have come before budget committees to lay out what they say would be the dire consequences of the cuts that would be needed if the tax rates drop. Mass layoffs, facility closures, threats to public safety, spikes in K-12 class sizes and deep cuts to programs that provide care to seniors or children, have all been cited in the doom and gloom presentations.
Meanwhile, Republicans argue that the state’s budget outlook is being framed as worse than it really is. They say that Democrats are pushing a doomsday version of the budget to lay the ground work for making the temporary income tax permanent. “The Democrats’ approach this entire spring has been to try to create as dire a picture as possible,” said Palatine Sen. Matt Murphy. “You can make it a lot more plausible that you can fund core services and still allow the tax rate to go back down as the Democrats promised it would, but they don’t want people to see that. They don’t want that argument out there because they want to continue to get the money that they’ve been getting.” Democrats passed the increase without Republican support in 2011. It seems likely that if the want to extend the rates, they will have to go it alone again. House Speaker Michael Madigan told reporters this week that the votes aren’t there to pass it in his chamber. He said that extending the tax would be a “difficult role call.” “Every person in the legislature is going to be called upon to make a budgetary decision — either a reduction budget or an as-is budget or a slight-increase budget,” Madigan said. “And they’ll be called upon to vote for the money to support the budget that they want.”
Gov. Pat Quinn advocated for extending the current rates in his budget address. He also wants to give homeowners a $500 tax credit that he has dubbed property tax relief. Madigan and Senate President John Cullerton quickly backed the governor’s call for keeping the current rates.
A potential extension of the income tax rates is not the only tax talk legislators are going to have in the coming weeks. The sponsor of a proposal to allow the state to have a graduated income tax has said he plans to call his proposal for a vote next week. Oak Park Democratic Sen. Don Harmon’s Senate Joint Constitutional Amendment 40 would overturn the current provision in the state’s Constitution that requires Illinois to have a flat income tax. The plan would not set the rates for such a tax, but Harmon and other supporters have issued proposed rates framework. If the amendment makes it through both chambers, it would appear before voters on the general election ballot. But that seems unlikely. Harmon may be able to get the amendment through the Senate, but Madigan said that it is “significantly short” of the support needed to pass on the House. Two constitutional amendments — one that would voters from discrimination and another that would strengthen the role of victims in the judicial process — have already been approved by lawmakers and will appear on the November ballot.
Proposed tax changes relating to business in the state could also be on the way. A House committee has been focusing on the tax climate faced by Illinois businesses. The group has been taking testimony on the issue for months, but has yet to publicly present any ideas.
Before the break, a Senate committee approved a plan to change the way that the state funding is doled out to schools. Senate Bill 16 would focus more heavily on the financial need of districts. The proposal would also eliminate the individual block grant that is given to Chicago schools, something Republicans on the committee have supported. The plan would also require more spending transparency at the district level. The committee debate became heated when Republicans accused sponsor Sen. Andy Manar, a Bunker Hill Democrat, of rushing the process. The Illinois State Board of Education is working to produce numbers that would show how the changes in SB 16 would affect each school district. Republicans say that they do not want to vote on the plan until they have that information.
Manar said that lawmakers from both parties agree that the current funding formula does not work. “The idea that we can have a few premier school districts in the state that exceed every expectation ... and have an incredible number that lag behind and call that a win in the state system is not a win in my book.” The ideas behind the legislation came from a report complied by a bipartisan committee that spent more than a year considering the topic. However, Republicans say they were not involved in drafting SB 16. Manar hopes that there will eventually be bipartisan support for the bill. He says he introduced it when he did to spur debate. “We could have waited until the last week of May, negotiated behind closed doors, popped a bill out and then had a vote. That’s not the way to do this,” Manar said.
A gaming expansion always seems to be on the table as the end of spring session nears. But getting it done is a difficult task. Putting together a bill that will make all the powerful groups involved happy, or at least not irate, is a balancing act, so is figuring out how to spread around the potential revenues in a way that will please or at least appease lawmakers. And even when gambling expansions have passed, Quinn has vetoed them. This time around, the governor has made some positive comments about expanding gambling. “You’ve got to have strong ethical standards, and I think they need to be enforced, and it has to be done by the independent Illinois Gaming Board,” Quinn told reporters in early April. “I think we have kind of ironed that out. I think we’re on the right path.” The governor has said in the past that he would not support an expansion unless the revenues went to fund education.
Blue Island Democratic Rep. Robert Rita is sponsoring a bill that would allow for the creation of new casinos, including one in Chicago, and slots at horse racing tracks. However, when compared to past proposals, Rita’s bill would scale back the number of slot machines racetracks could have. Rita has another version that would only create a Chicago casino. The racing industry opposes both. It also seems that Chicago Mayor Rahm Emanuel will not throw his weight behind a Chicago casino plan at this point. Emanuel is echoing past statements from Quinn, saying that he will not focus on a casino until the city’s underfunded pension systems are addressed. The General Assembly already approved changes to the systems for city workers. Emanuel also wants changes to stabilize the systems for teachers, police officers and firefighters. Before they passed changes to the state’s pension systems, Quinn warned lawmakers not to be distracted by the “shiny” object of gaming legislation.
Check back for a guide on bills to watch as legislators make the final push toward the end of spring session.
Thursday, March 27, 2014
Madigan's millionaires tax has its political advantages
By Jamey Dunn
The House revenue and finance committee dove right into the topic of taxes this morning following Gov. Pat Quinn’s budget speech yesterday.
The committee today approved Speaker Michael Madigan’s proposal to tax millionaires at a higher rate to fund education and rejected a measure that would have allowed for a graduated income tax in the state. As protesters flowed into the capitol chanting, “We want a fair tax,” the House revenue and finance committee voted down a proposed constitutional amendment that would allow Illinois to have a graduated income tax. Currently, the state’s Constitution requires a flat income tax.
Committee members cited concerns that the proposed amendment does not include the progressive tax rates structure, but simply would change the Constitution to allow the legislature to approve a graduated tax. “I don’t believe its wise to put simple a strike through amendment on the ballot. I think the better approach is to enumerate what would be asked of the voters,” Riverside Democratic Rep. Michael Zalewski said before he voted against the amendment today.
Supporters of the plan say that it is best not to enshrine tax rates into the Constitution, because the threshold for changing the document is so high. “Actually embodying rates in the Constitution from just a good government and policy standpoint is very problematic because if you’ve got that rate wrong or you’d like a change, now you need a new constitutional amendment. It’s far better the have the rate structure be a creature of legislation so that you can adjust your tax policy over time,” said Ralph Martire, executive director of the Center for Tax and Budget Accountability. Oak Park Democratic Sen. Don Harmon, sponsor of a Senate version of the graduated tax amendment, unveiled proposed rates earlier this week.
Martire said that the concept of taxing the wealthy at a higher rate, which is also at the core of Madigan’s proposal, is a good policy choice because most income growth is occurring amongst higher earners. However, he said that putting the specifics, such as the rate and the $1 million cut off, in the constitution does not allow for the flexibility that would be needed as the economy changes and inflation marches forward. For example, if in the future lawmaker decide that the rate is too high, or that $1 million is not what it used to be in terms of earnings, or that they want some of the money to go to health care instead of education, they will have to gain the support of three-fifths of both chambers and then wait for an election. They then would need to get the support of either three fifths of voters who vote on the question or the majority of voters participating in the election. If some of those details were determined by legislation instead, they could be changed by a simple vote in each chamber and the governor's signature.
Policy debates aside, Madigan’s proposal, which would impose a 3 percent surcharge on income offer $1 million, likely won out for a number of reasons. It would be a much easier vote than voting for the graduated income tax for lawmakers who have few millionaires in their area. Marion Democratic Rep. John Bradley, who is chairman of the committee, said as much before he voted in favor of the proposal. “This is an opportunity for a lot of areas of the state to actually do a lot better with minimal impact on my region.” There seems to be a perception among lawmakers that Madigan’s amendment is ready for primetime, while the graduated tax is not. “The speaker’s amendment is more show ready than this,” Zalewski during committee today. The graduated income tax proposal does not have the needed support to pass in the House. Still, Harmon said he has not given up hope on the graduated tax idea. He told supporters today “do not despair,” and said that the fight has just begun.
Conservative groups and business organizations are opposed to both. However, it does seem that the opposition has been hitting the graduated tax proposal much harder. National groups such as American’s for Prosperity and The Tax Foundation have joined the fray over the graduated tax plan. Of course, it has been around a lot longer so opposition has had more time to build and organize. Todd Maisch, the vice president of government affairs for the Illinois Chamber of Commerce, said at today’s hearing that the flat tax is a “key incentive” for businesses considering Illinois. And that the graduated tax comes from a “soak the rich mentality” that send a negative message to businesses and successful individuals. He also said Madigan’s plan would hit small businesses that file their taxes as individuals.” We think it’s just the wrong public policy to punish them with this surcharge.” If either of these plans is going to pass in the House, it would likely need the support of all Democratic members, something the graduated tax lacks. (For a comprehensive look at the graduated tax proposal and the arguments for and against it, see Illinois Issues January 2014. )
Madigan’s plan would probably be easier for voters to understand if it makes it to the general election ballot. It would also likely be very popular with anyone who is not bringing in $1 million (or close to it) annually because they would not be affected. It could also be useful as campaign ammunition that Quinn could against his opponent, multimillionaire Republican Bruce Rauner, who opposes the plan. The proposal would not conflict with Quinn proposal to make the temporary income tax increase permanent and give homeowners a $500 refund to defer property tax costs. Quinn is also asking to double the Earned Income Tax Credit for low-income workers from 10 to 20 percent. If this proposal and Madigan’s end up working in concert, it would be a rudimentary version of a graduated plan because lower earners would have more of their tax burden deferred and higher earners would pay more. It might have less nuance and flexibility than a graduated tax plan, but it would also be free of the political baggage of claims that it would hurt the middle class (depending on where you think the cut off is for the middle class).
Martire says that, while he thinks the graduated tax amendment if better policy, the politics of the situation cannot be put aside. “Any legislation or constitutional amendment that moves through a very political process has to take political concerns into account or it wouldn’t be a very sophisticated approach to changing policy,” he said after the hearing. “Illinois is at least moving towards a fairer tax structure and moving toward amending its Constitution to permit a fairer tax structure. Now the questions is whether or not that amendment is going to be the best one that we could have.”
The House revenue and finance committee dove right into the topic of taxes this morning following Gov. Pat Quinn’s budget speech yesterday.
The committee today approved Speaker Michael Madigan’s proposal to tax millionaires at a higher rate to fund education and rejected a measure that would have allowed for a graduated income tax in the state. As protesters flowed into the capitol chanting, “We want a fair tax,” the House revenue and finance committee voted down a proposed constitutional amendment that would allow Illinois to have a graduated income tax. Currently, the state’s Constitution requires a flat income tax.
Committee members cited concerns that the proposed amendment does not include the progressive tax rates structure, but simply would change the Constitution to allow the legislature to approve a graduated tax. “I don’t believe its wise to put simple a strike through amendment on the ballot. I think the better approach is to enumerate what would be asked of the voters,” Riverside Democratic Rep. Michael Zalewski said before he voted against the amendment today.
Supporters of the plan say that it is best not to enshrine tax rates into the Constitution, because the threshold for changing the document is so high. “Actually embodying rates in the Constitution from just a good government and policy standpoint is very problematic because if you’ve got that rate wrong or you’d like a change, now you need a new constitutional amendment. It’s far better the have the rate structure be a creature of legislation so that you can adjust your tax policy over time,” said Ralph Martire, executive director of the Center for Tax and Budget Accountability. Oak Park Democratic Sen. Don Harmon, sponsor of a Senate version of the graduated tax amendment, unveiled proposed rates earlier this week.
Martire said that the concept of taxing the wealthy at a higher rate, which is also at the core of Madigan’s proposal, is a good policy choice because most income growth is occurring amongst higher earners. However, he said that putting the specifics, such as the rate and the $1 million cut off, in the constitution does not allow for the flexibility that would be needed as the economy changes and inflation marches forward. For example, if in the future lawmaker decide that the rate is too high, or that $1 million is not what it used to be in terms of earnings, or that they want some of the money to go to health care instead of education, they will have to gain the support of three-fifths of both chambers and then wait for an election. They then would need to get the support of either three fifths of voters who vote on the question or the majority of voters participating in the election. If some of those details were determined by legislation instead, they could be changed by a simple vote in each chamber and the governor's signature.
Policy debates aside, Madigan’s proposal, which would impose a 3 percent surcharge on income offer $1 million, likely won out for a number of reasons. It would be a much easier vote than voting for the graduated income tax for lawmakers who have few millionaires in their area. Marion Democratic Rep. John Bradley, who is chairman of the committee, said as much before he voted in favor of the proposal. “This is an opportunity for a lot of areas of the state to actually do a lot better with minimal impact on my region.” There seems to be a perception among lawmakers that Madigan’s amendment is ready for primetime, while the graduated tax is not. “The speaker’s amendment is more show ready than this,” Zalewski during committee today. The graduated income tax proposal does not have the needed support to pass in the House. Still, Harmon said he has not given up hope on the graduated tax idea. He told supporters today “do not despair,” and said that the fight has just begun.
Conservative groups and business organizations are opposed to both. However, it does seem that the opposition has been hitting the graduated tax proposal much harder. National groups such as American’s for Prosperity and The Tax Foundation have joined the fray over the graduated tax plan. Of course, it has been around a lot longer so opposition has had more time to build and organize. Todd Maisch, the vice president of government affairs for the Illinois Chamber of Commerce, said at today’s hearing that the flat tax is a “key incentive” for businesses considering Illinois. And that the graduated tax comes from a “soak the rich mentality” that send a negative message to businesses and successful individuals. He also said Madigan’s plan would hit small businesses that file their taxes as individuals.” We think it’s just the wrong public policy to punish them with this surcharge.” If either of these plans is going to pass in the House, it would likely need the support of all Democratic members, something the graduated tax lacks. (For a comprehensive look at the graduated tax proposal and the arguments for and against it, see Illinois Issues January 2014. )
Madigan’s plan would probably be easier for voters to understand if it makes it to the general election ballot. It would also likely be very popular with anyone who is not bringing in $1 million (or close to it) annually because they would not be affected. It could also be useful as campaign ammunition that Quinn could against his opponent, multimillionaire Republican Bruce Rauner, who opposes the plan. The proposal would not conflict with Quinn proposal to make the temporary income tax increase permanent and give homeowners a $500 refund to defer property tax costs. Quinn is also asking to double the Earned Income Tax Credit for low-income workers from 10 to 20 percent. If this proposal and Madigan’s end up working in concert, it would be a rudimentary version of a graduated plan because lower earners would have more of their tax burden deferred and higher earners would pay more. It might have less nuance and flexibility than a graduated tax plan, but it would also be free of the political baggage of claims that it would hurt the middle class (depending on where you think the cut off is for the middle class).
Martire says that, while he thinks the graduated tax amendment if better policy, the politics of the situation cannot be put aside. “Any legislation or constitutional amendment that moves through a very political process has to take political concerns into account or it wouldn’t be a very sophisticated approach to changing policy,” he said after the hearing. “Illinois is at least moving towards a fairer tax structure and moving toward amending its Constitution to permit a fairer tax structure. Now the questions is whether or not that amendment is going to be the best one that we could have.”
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