SPRINGFIELD - If Illinois were to move from a flat income tax rate to the progressive tax system where the wealthy pay more, how would a typical middle-income household of two making $75,000 annually fare? Would they pay more in Illinois taxes than they do now, or less?
Those advocating that a flat tax is the fairest tax and calling for the temporary 2011 state income tax hike to return to pre-2011 levels say one thing, while those wanting the progressive system say another.
Each side of the argument has an online calculator for the curious to run their numbers to see how their budgets would fare if Illinois adopted the progressive tax.
Illinois Policy Institute's UnfairforIllinois.com website asks "How much higher will my taxes be under the progressive tax?" and the participants are asked to enter their salary and number in their household. The Institute's calculator says a household of two making $75,000 per year will pay $564 more per year.
A Better Illinois' progressive tax calculator show the same couple would save $321 per year with the progressive taxs, an $864 difference from The Institute's calculation.
The difference is so dramatic, A Better Illinois accused those opposing the progressive tax of lying:
Current Illinois law says that in January 2015, the 2011 tax rate will return to 3.75% from its current 6% rate. Illinois Policy Institute's online calculator uses the 2011 3.75% rate to determine how much more taxpayers will pay with a projected progressive rate.
"The 2011 income tax hike, which increased everyone’s rate to 6 percent, was sold as a temporary measure to pay down an $8.5 billion bill backlog. As of Jan. 1, 2015, state law requires the rate to return to the flat rate of 3.75 percent, but politicians have yet to make much headway on paying down Illinois’ debt," The Institute says. "The 'fair tax' would let them renege on their promise and hike taxes further, all under the guise of a reform measure – and without any fiscal accountability – as Illinois’ fiscal woes continue to worsen."
The "Fair Tax" calculator is projected based on the current 6 percent rate, with an idea that the rates would go down for those in the $75,000 range. But because the actual schedule of rates will be determined by lawmakers if Illinois voters support amending the constitution to reflect a progressive income tax, no one really knows the rates state lawmakers will use to determine each income level's state income taxes.
While progressive tax supporters are focused on the wealthy carrying most of the state's tax burden, if the 2011 income tax hike is not allowed to return to its 2010 levels, taxes will remain at their current higher levels on anyone paying taxes in Illinois.