By Bob Bong
Illinois voters appear to be sending Gov. J.B. Pritzker’s graduated income tax amendment down to defeat Tuesday night.
With 74 percent of the vote counted, unofficial results show the amendment being rejected by state voters 54-46 percent. More than 2 million “no” votes were cast to 1,828,404 “yes” votes.
There were two paths to victory, but the measure did not appear to be reaching either threshold.
The measure needed 60 percent of the vote from those voting on the question to pass. But if it failed to reach that 60 percent threshold for those voting on the question, it could still win by mustering “yes” votes from more than half of those voting in the election.
Due to outstanding mail ballots and the multiple paths to passage, official results may take weeks to certify.
Critics of the tax pointed to voter mistrust of Springfield lawmakers and the amendment’s possible effect on small businesses among key reasons for the proposal’s apparent defeat.
The amendment would have removed a provision from the Illinois Constitution that required any income tax to be levied at a flat rate on any level of income — the current rate is 4.95 percent.
Passage of the amendment would have allowed lawmakers to apply different tax rates on varying levels of income. Of the 42 states that have an income tax, 32 and Washington, D.C., have a graduated rate structure, while Illinois is one of nine that impose a flat tax.
While the amendment itself would not have set any tax rates, legislation already passed by lawmakers and signed by the governor would have taken effect in January if the amendment passed. The rates created by that legislation would apply to six tax brackets, ranging from 4.75 percent on income up to $10,000 to 7.99 percent on all income for individual filers making more than $750,000.
In estimates released before the COVID-19 pandemic, the governor’s office said the graduated tax was expected to bring in about $1.2 billion for the current fiscal year as it would be in place for only part of it, and $3.4 billion once it is in place for a full year.
Pritzker has said the amendment and the rates approved are all about raising more revenue without increasing rates on middle-income earners or making drastic budget cuts to state services, education and public safety.
At his daily COVID-19 briefing Tuesday afternoon, Pritzker said he was optimistic about the results of the graduated tax measure but said he was not sure results would be known quickly, due to the number of outstanding mail ballots.
“ As I've said many times before, the options for Illinois without the fair tax are not good,” he said.
He again noted one option is raising revenue “on a very regressive basis” by raising the flat tax.
“ It is significantly regressive, it benefits the wealthy, and it hurts the middle class and those who are striving to get there,” he said of the flat tax. “And there's no doubt that Illinois would need revenue in addition to obviously looking at cuts in state government as we have.”
He once again said cuts could lead to reductions in public safety, education and human services dollars by up to 15 percent “exactly at a moment when people need these things most.”
“ And so, the alternatives are not good. That's why I proposed a third way, I didn't think that either one of those seemed like a good idea,” Pritzker said.
On Sept. 24, Lt. Gov. Juliana Stratton said lawmakers "will be forced to consider raising income taxes on all Illinois residents by at least 20 percent, regardless of their level of income” if the graduated income tax fails. That would push the current tax rate to about 6 percent, and would require a simple majority vote in a Legislature dominated by Democrats with or without the passage of the amendment.
Opposition, led in large part by the Illinois Chamber of Commerce, has centered on what the tax would do to businesses and what lawmakers might do in the future if voters give them the opportunity to levy taxes on portions of the electorate at any one time, rather than on every taxpayer at once.
They also point out the added revenues would not cover state budget deficits amid the pandemic and would require further tax hikes in the future, which could mean adjusting the brackets to raise rates on middle-income earners.
The idea, according to much of the advertising against the amendment, is that giving state politicians the authority to raise taxes on just a small group of taxpayers at any one time makes it easier politically to raise taxes, even though the simple majority vote threshold remains unchanged.
While those against the measure said the increase to the corporate tax rate would hit job creators hard at a time when the pandemic was already making it difficult to remain afloat, proponents noted that businesses structured as pass-through entities — such as S corporations, sole proprietors and others who claim business income on personal taxes — would see taxes decrease if they earned less than $250,000 annually in taxable income.
Capitol News Illinois contributed to this report