When Illinois raised its state income tax to 5 percent in 2011 — a temporary 67 percent hike slated to expire in 2015 — the goal was to eliminate the state’s debt.
“It was no panacea,” state Rep. Ron Sandack, R-81st of Downers Grove, told members of the DuPage County Board, saying the state is still mired in debt.
Sandack spoke at a special meeting of the County Board’s Economic Development Committee, where he argued against changing the state constitution to allow a progressive, graduated state income tax.
Pending legislation in both houses of the General Assembly would place a referendum question on the November 2014 ballot asking voters to give legislators the power to end the flat tax mandated since the Illinois Constitution was written in 1970.
Sandack argued that increasing taxes on Illinois taxpayers would only serve to discourage job creation and economic growth in Illinois, noting that Illinois already had the highest jobless rate in the Midwest.
Sandack said with nearby Indiana and Michigan having tax rates lower than Illinois, the state was already operating at a competitive disadvantage.
After the meeting, committee Chairwoman Tonia Khouri, an Aurora Republican, agreed with Sandack concerning the graduated tax. She said that the flat tax was originally implemented with the reasoning that it would be equitable for all Illinois taxpayers.
“It’s fair,” she said. “If someone makes more money, then they pay more taxes.”
So far, the debate in the General Assembly is split along partisan lines, with Democrats in favor of the referendum question and Republicans opposed. The DuPage County Board debate on the issue promises to be equally partisan.
County Board member Laurie Nowak, a Democrat from Bartlett, wondered if the state’s financial condition was as dire as portrayed by Sandack, noting that the fourth quarter of 2013 had produced strong growth.
County Board member Elizabeth Chaplin, a Democrat from Grove, questioned whether the flat tax was really as fair as portrayed by those who want to retain the status quo. She said that recent years had seen cuts in services to seniors and education, and that when factoring in all the other taxes Illinois residents paid, the brunt of the tax burden fell on the shoulders of lower-earning taxpayers.
“It’s an unfair system,” she said.
Khouri said the task of her committee is to determine whether a progressive tax would be good for DuPage County.
She stressed DuPage was home to 17,000 small corporations filing under the “subchapter S” federal tax code, meaning proprietors don’t pay federal corporate taxes, but do file their earnings as personal income, and would be affected under any income tax hike.
Chaplin pointed out that amending the state constitution would only give the legislature the power to implement a progressive tax, saying, “it doesn’t necessarily mean they will.”
Sandack repeatedly made the case for fundamental reform of Illinois’s finances, saying that in addition to any questions of new revenue, the state would have to address the spending side of the equation. He warned that tough decisions awaited Illinois lawmakers.
“The state can’t be the be-all and end-all,” he said.
The DuPage County Board Economic Development Committee will reconvene at 10 a.m. Feb. 4 to hear testimony from Ralph Martire, of the Center for Tax and Budget Responsibility, who is expected to make the case for putting the graduated tax question to the voters.