By Bryce Hill | Illinois Policy Institute
Proponents of a push to scrap Illinois’ constitutionally protected flat income tax and add a 3% income tax hike on those earning more than $1 million claim increased revenue could be used for property tax relief.
However, analysis of Illinois state finances shows the massive tax hike would still come up more than $2 billion short of being able to provide Illinoisans with property tax relief. According to the state’s most recent projections, Illinois needs to dedicate nearly $4.9 billion more on an annual basis to the five state-run pension plans in order to make an actuarially sufficient contribution and begin paying down the state’s unfunded pension liabilities.
The state is also projecting a base general funds deficit of more than $1.4 billion in the upcoming 2026 fiscal year. Combined, state officials would need to raise $6.3 billion to cover their own unfunded expenses before passing along any funds to be used for property tax relief. Estimates based on the most recent state tax return data available and a Freedom of Information Act request from the Illinois Department of Revenue show that a 3% income tax hike on earners making more than $1 million would likely only generate $3 billion to $4.3 billion in additional revenue.
Illinois voters will see a series of non-binding advisory questions appearing on their November ballots. One of which is to change Illinois’ income tax structure from a single flat rate to a system that would allow for income to be taxed at varying rates by proposing an additional 3% income tax on those with incomes more than $1 million.
The advisory question states the additional funds would be dedicated to property tax relief. While this may sound like a good idea to Illinoisans who currently grapple with the second-highest property taxes in the nation, analysis shows that the proposed income tax hike would fail to raise enough revenue to cover the state’s own bills, let alone provide meaningful property tax relief to homeowners.
The most recent tax return data available from the Illinois Department of Revenue shows that a 3% income tax hike on earnings above $1 million would raise between $3 billion and $4.3 billion based on static revenue estimates, not accounting for the negative effects of income tax hikes on the economy.
Read more here.
Related: “Legislator says ‘millionaire tax’ will make Illinois a ‘business desert’ (McLaughlin),” “Should Illinois millionaires fund property tax relief?”
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