Illinois: Governor and Comptroller Each Have It Partially Right on the Income Tax


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Can’t we all just get along? 

Proponents of progressive taxation in Illinois might be wondering just that after listening to the main candidates for the Democratic nomination for Governor – incumbent Governor Pat Quinn and Comptroller Dan Hynes – criticize each other’s income tax plans over the past two months. 

As ITEP explains in its most recent report, both plans are progressive, as they would both require more affluent Illinoisans to contribute larger shares of their incomes to maintaining public services than individuals and families struggling to make ends meet. 

Sure, of the two plans, the one offered by Comptroller Hynes may be fairer, but it may also be less well-suited to meeting Illinois’ current and future revenue needs than the plan put forward by Governor Quinn in March.  The Hynes plan's only change to the income tax would be the creation of a graduated rate structure that would impose higher tax rates on upper-income taxpayers, an approach to taxation that is currently barred by the Illinois Constitution. 

Getting the Hynes plan off the drawing board and into the tax code could thus take several years, even though there is a clear need for additional revenue now. (The state's budget deficit for the upcoming fiscal year is projected to be $12 billion.)  What’s more, while the Comptroller asserts that his income tax plan would generate as much as $5.5 billion, ITEP estimates that it would yield only about $2.2 billion if in effect in 2011. 

Consequently, as ITEP suggests in its report, what is needed is an approach that combines the principal elements of both plans – the immediacy of the Quinn plan coupled with the fundamental reform embodied in the Hynes plan. 

If Illinois were to enact this spring an increase in its single income tax rate to 4.5 percent and to triple its personal and dependent exemptions – as Governor Quinn proposed earlier this year – it could generate roughly $1 billion for FY10.

Those changes could then serve as a bridge to a graduated rate structure, a bridge that could be removed once that new structure is in place.  As the ITEP report points out, adopting a graduated rate structure ranging from 3 to 7.5 percent, while leaving in place the higher personal exemptions recommended by the Governor, could ultimately generate in excess of $4 billion annually, while reducing taxes for nearly three out of every five Illinois taxpayers. 

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