[10] U.S. Small Business Administration, “2019 Small Business Profile: Illinois,” 2019, https://cdn.advocacy.sba.gov/wp-content/uploads/2019/04/23142647/2019-Small-Business-Profiles-IL.pdf. It’s the first question you’ll see, and you should vote yes. for the purpose of arriving at the amount of income upon which On Thursday, June 18 AARP Illinois State Director Bob Gallo issued the following statement in response to recent misinformation published in new accounts regarding the current Fair Tax proposal. The 7.99 percent rate on nonbusiness income would be the eighth-highest state rate in the country. That's how Gov. The ballot measure would have repealed the state's constitutional requirement that the state income tax is a flat tax across income levels and implemented a graduated tax instead. [11] Orphe Divounguy and Bryce Hill, “Illinois Ranks 46 out of 50 States in Private Sector Jobs Growth,” Illinois Policy Institute, Jan. 23, 2019, https://www.illinoispolicy.org/illinois-ranks-46-out-of-50-states-in-private-sector-jobs-growth/. It’s a concern, in fact, that the governor acknowledged in a news conference, albeit in an effort to dispute it. LLC vs DBA: Is One Better Than the Other? [98][99] During the COVID-19 pandemic, the Chicago Sun-Times editorial board argued that the best way to thank essential workers and service sector workers during the pandemic would be to pass the Fair Tax, arguing that an extra dollar is more valuable to these workers than it is for the rich. An individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. Note: In aggregate, businesses with less than $25,000 in AGI post negative income. In every other region of the state, the Amendment falls short from a low of 43.8% in Northern Illinois, 35.9% in Southern Illinois, 45.4% in Central Illinois, and 53.4% in the Collar Counties. *For taxpayers who have any taxable income above $750,000 (single filers) or $1 million (joint filers), the proposal includes a recapture provision that subjects all taxable income to the 7.99 percent rate, removing the benefit to those taxpayers of the lower marginal rates. While not all pass-through businesses are small businesses, it’s worth noting that small businesses are responsible for 45.1 percent of Illinois employment. A marriage penalty exists whenever two earners owe more tax filing jointly than they would if they filed separately. [4] Nicole Kaeding and Jeremy Horpedahl, “Help from Our Friends: What States Can Learn from Tax Reform Experiences Across the Country,” Tax Foundation, May 15, 2018, https://taxfoundation.org/state-tax-reform-lessons-2018/. [82][83][85][86][87][88] Many proponents, including the organizations formed to advocate for the passage of the proposal, have emphasized that 97% of Illinois families would not see an increase in income taxes, since the new rates passed by the legislature accompanying the ballot referendum only raise taxes for those making over $250,000. Illinois' current individual income tax rate is a flat 4.95% for everyone. The Illinois Fair Tax amendment is on the November election ballot. In any Illinois' political leaders are talking a lot about fairness this year. ‘‘There will be cuts’- Pritzker on failure of the Fair Tax amendment Business owners and the Illinois Chamber of Commerce are opposed to Pritzker’s tax plan, claiming it … (a) The General Assembly shall provide by law for the rate To avoid this “bracket creep,” most states with graduated-rate structures index bracket widths and other features of the income tax to inflation. Individual income taxes are the largest source of tax revenue in the U.S. A corporate income tax (CIT) is levied by federal and state governments on business profits. [9], In 2013, State Rep. Naomi Jakobsson, an Urbana Democrat proposed and advanced HJRCA 33, the initial House legislative vehicle for the proposal. [50], Proponents argue that a tax structure which includes lower rates for lower-income residents and higher marginal rates for higher-income residents would be fairer. The Tax Foundation works hard to provide insightful tax policy analysis. They ignore the fact that people and businesses are fleeing our state now under our current regressive tax system, yet states with fair tax systems on average grow faster and create more jobs than Illinois.”[12]. Concurrent with the proposed constitutional ame… The literature on graduated-rate income taxes is particularly unfavorable, with substantial evidence that higher marginal tax rates reduce gross state product growth even after adjusting for overall state tax burdens.[15]. [5] Meanwhile in Iowa, a package of reforms adopted in 2018 will ultimately bring the top individual income tax rate to 6.5 percent (from 8.98 percent), and the top corporate income tax rate will drop from 12 percent to 9.8 percent on January 1, 2021. Here is how the ballot language will read: Illinois Fair Tax Bill | A Few Thoughts Posted: 21 Sep,2020 by David Mills Category: Advice, All Articles, Tax Planning and Preparation Illinoisans are being asked to vote on a “Fair Tax” in November. In Missouri, a set of bills in 2018 reduced the state’s corporate and individual income tax rates. While many small businesses pay through the individual income tax because they are organized as pass-through entities, traditional C corporations are double-taxed, paying taxes at both the entity level and again at the ownership level, so an attempt to keep the corporate rate aligned with the top individual rate only exacerbates an existing disparity. The Fair Tax Amendment would allow the state to impose higher tax rates on those with higher income levels and lower tax rates on those with lower income levels. Illinois ranked 46th in the nation in private sector job growth in 2018. In a state where taxes tend to be high, this constitutional provision has been crucial to keeping one tax (the individual income tax) highly competitive, because there are practical and political limits on just how high a rate can go when it is applied uniformly. AARP supports the current graduated income tax proposals which, in no way, taxes retirement income or makes it any easier to implement a tax on retirement income. Single filers with a taxable income over $750,000 and joint filers with a taxable income over $1 million would pay the maximum rate of 7.95% on their net income, rather than paying marginal tax rates for each tier of income. Washington, DC 20005, Banner image attribution: Adobe Stock, Андрей Клафилин, Tax Expenditures, Credits, and Deductions, Taxes on Savers, Investors, and Entrepreneurs, Small Business, Pass-throughs, and Non-profits, Analysis of 2020 Presidential Tax Proposals, Research & Analysis of Digital Tax Policies, Consumption Tax Policies in OECD Countries, Sources of Government Revenue in the OECD, Opportunities for Pro-Growth Tax Reform in Austria, Tax Proposals, Comparisons, and the Economy, https://www2.illinois.gov/rev/localgovernments/Pages/replacement.aspx, https://taxfoundation.org/state-tax-reform-lessons-2018/, https://www.claconnect.com/resources/articles/2018/missouri-cuts-corporate-and-individual-income-tax-rates-and-more, https://taxfoundation.org/whats-iowa-tax-reform-package/, https://taxfoundation.org/kentucky-tax-reform-package/, https://taxfoundation.org/minnesota-tax-conformity/, https://www.irs.gov/statistics/soi-tax-stats-historic-table-2, https://cdn.advocacy.sba.gov/wp-content/uploads/2019/04/23142647/2019-Small-Business-Profiles-IL.pdf, https://www.illinoispolicy.org/illinois-ranks-46-out-of-50-states-in-private-sector-jobs-growth/, https://www2.illinois.gov/Pages/news-item.aspx?ReleaseID=19772, https://www.reuters.com/article/us-illinois-budget/illinois-governor-looks-to-income-tax-change-to-boost-fiscal-year-2021-revenue-idUSKBN20D2NF, https://taxfoundation.org/what-evidence-taxes-and-growth/, https://www.census.gov/programs-surveys/gov-finances.html, https://taxfoundation.org/publications/state-business-tax-climate-index/. [2][113][114], 2013–14: First attempts to pass graduated income tax in Illinois, 2019: Passage of a graduated income tax proposal. 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The bill received some criticism for containing no proposed tax rate schedule. Similarly, the corporate rate was reduced from 6.5 to 4 percent, effective January 2020. The amendment—which was referred to the November ballot  with passage of Senate Joint Resolution Constitutional Amendment No. Pritzker Unveils Fair Tax Plan with 97 Percent of Taxpayers Getting Tax Relief.”. Fulks said the current flat tax system is not working because it allows billionaires and millionaires to pay the same tax rate as middle-class and working families. The amendment would have allowed the state to impose a graduated-rate income tax structure that would tax … Meanwhile, the base corporate rate would increase from 7 to 7.99 percent (10.49 percent counting the personal property replacement tax), in a misguided—and miscalculated—effort to match the new top rate on individual income. 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