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One of the most contentious political battles of the 2020 election cycle involves the Illinois “Fair Tax” ballot amendment. Supported politically (and financially) by Illinois’s billionaire governor, J. B. Pritzker, the amendment seeks to remove a provision in the Illinois constitution that requires all income taxes to be flat—that is, held at a constant rate regardless of the amount of income earned by any taxpayer. Currently, all income earned in Illinois is taxed at a 4.95 percent rate. The amendment requires a simple majority vote to be passed.
The amendment does not offer any specific progressive rate scale, but allows for increasing tax rates to be applied to successive tiers of a taxpayer’s income. Notably, the initial legislative plan on which the amendment is largely based—and which was proposed by the Democrat-controlled legislature—is a hybrid between a flat and progressive scheme. Most earners would be subject to progressive rate scales starting at 4.75 percent for the first $10,000 of income earned. Then. as income increases, so would the tax rate, maxing out at 7.85 percent. The legislative plan maintains a flat tax for the financial elite: Individuals reporting income above $750,000 and couples with joint incomes above $1,000,000 would pay a 7.95 percent rate from their first dollar.
This change in tax structure is held out as the fairest because it puts onto the rich the burden of shoring up Illinois’s rickety finances. The argument goes that the poorest 20 percent of the public are disproportionately exposed to high state, county, and local sales taxes, which total 10.25 percent in Chicago. This leads to a regressive system overall, where the poor pay an effective tax rate of 14.4 percent, while the top 1 percent pay only 7.4 percent. The obvious rejoinder is that, in total dollars, the rich pay far larger amounts in all taxes, much of which is used for transfer payments from which they do not benefit.