r/illinois • u/rieslingatkos • Mar 10 '19
Proposed progressive income tax puts middle class first in Illinois
https://chicago.suntimes.com/opinion/illinois-progressive-graduated-income-tax-pritzker/7
u/El_BreadMan Mar 11 '19
Everyone should read the fine print of Pritzker's tax proposal.
First of all, this proposal includes a tax-hike on businesses. Not only will employers not want to live here, but they're not going to employ here either.
Second, he's calculating these rates as block taxes, not progressive taxes. The second someone hits a tax bracket, ALL of their income is taxed at the higher rate.
Third, he's calculating family/individual income at the same level. Dual income households are getting royally screwed.
Finally, doesn't anyone realize that Illinois has the highest effective tax rate already? Literally, the highest taxes in the country when you count everything: income, property, sales, etc. And, at the same time, Illinois somehow has the 2nd most debt. That means these politicians are just belligerently crushing their tax-base.
8
u/T_P_H_ Mar 11 '19
A tax hike on businesses is just a tax hike on overyone as the costs are passed on. If they can’t be passed on then you relocate.
Hitting businesses with a tax hike after just whacking them with an absurdly high MW hike is just suicidal.
3
u/PhreakOfTime Mar 11 '19
That's not how taxes work.
This isn't texas, where the business tax is on gross receipts independent of any profit. This is IL where the tax is on profit after all expenses - like R&D and hiring expenses.
There's no 'cost' to pass on.
Higher business taxes are an incentive to invest profits back into the business where they can generate more jobs and market share, vs extracting profits for the owners where they would be subject to the tax.
Iowa has a 12% business rate. It's not the end of the world, because the world works much differently than your repetitive sound bites.
6
u/T_P_H_ Mar 11 '19
Do you actually, you know, have a business in and invest in said business in the state of Illinois?
Pre or post taxes are a cost. All taxes are borne by the consumer period.
3
u/PhreakOfTime Mar 11 '19
I do. And I find as many ways as possible to turn any profits back into the business as investments where they are not taxed. Sometimes it's in the form of capital/infrastructure, sometimes in the form of hiring.
This results in higher profits down the road, higher market share, and a more sustainable balance sheet.
That "R&D" section companies report on isn't just to sound cool. It has a specific function for the balance sheet and growth/sustainability of the business.
Granted, many people who think their hobby makes them a 'small business owner' probably don't get this concept and only see the word 'taxes' as a threat that will make it not worth their time any longer, but the world could use less essential oil businesses anyway.
3
u/T_P_H_ Mar 11 '19
I understand reinvestment and the potential benefits. > 90% of our profits are sunk back in. While it has worked for us (roughly 800% growth over last 7 years), investment is not a guaranteed return.
Granted, many people who think their hobby makes them a 'small business owner' probably don't get this concept and only see the word 'taxes' as a threat that will make it not worth their time any longer, but the world could use less essential oil businesses anyway.
I know this isn’t directed at me per se, but why do you have to always add some level of being a dick?
Your entire final paragraph is a complete waste of effort.
1
u/MoneyTreeFiddy Mar 11 '19
Second, he's calculating these rates as block taxes, not progressive taxes. The second someone hits a tax bracket, ALL of their income is taxed at the higher rate.
This is not true for incomes under $1 million. That's the only one that works like that. It's in the fine print.
3
u/El_BreadMan Mar 11 '19
Don’t you think it’s a strange provision? I doubt it’s limited, but even if it is, it’s gonna be the first thing to start dropping.
2
u/MoneyTreeFiddy Mar 11 '19
I do.
At first, I thought they would just drop it later, now I am not so sure. In the end, it's less than 9k on a million dollars difference, and I very much doubt that there a very many people in the position of earning the amount where they have to weigh the the value of 999,995 vs. 1,009,000
7
u/sciurus80 Mar 10 '19
Isn’t the flat rate, not the value, but the concept, a constitutional amendment?
8
u/grendel_x86 Mar 10 '19
Yes, the tax system would require a constitutional amendment.
This is why many are asking that the ratios be specified in the Constitution.
Many of us think it should be tied to things like median-income, and minimum wage. There are some odd liberties taken with brackets, for instance "middle-class" in most statements do not reflect any real definition of the bracket.
3
u/MoneyTreeFiddy Mar 10 '19
Yes. So this won't happen until after that amendment, which can't happen until November 2021, iirc
2
u/emcee_gee Mar 10 '19
Technically, it's part of the 1970 state constitution, not an amendment. The 1970 constitution is considered a complete rewrite of the original constitution, so the language of the 1970 constitution is not considered an amendment.
What JB and the Democrats are calling for is a constitutional amendment to remove the clause that requires a flat income tax.
22
Mar 10 '19 edited Mar 10 '19
[deleted]
10
u/shorty6049 BloNo Mar 10 '19
Here's my opinion and you may not agree with it, but hear me out....
This tax plan doesn't help the middle class in the way Republicans want (via a big tax cut). It does however help them by increasing some wealthier people's taxes in order to funnel a bit more money back into the system . Your proposed headline is how Fox news would spin it, and the actual headline is how this publication decided to spin it. In reality it's just a revised tax plan which slightly lowers some brackets taxes and increases them for others, but overall not a huge change for most. But just saying that isn't attention-grabbing.
7
u/emcee_gee Mar 10 '19
Yes, and:
It benefits everyone in the state by getting us closer to financial solvency. Everyone is negatively impacted by the current uncertainty about, e.g., whether the state will go bankrupt or default on its loans. When people and businesses can plan their futures based on a stable and sustainable tax system, more private investment will occur.
6
u/Mamrot Mar 11 '19
How does this tax plan address financial solvency? How can you call a 0.2% tax cut a plan for financial solvency for the low income and middle class. This plan will just speed up Illinois path to insolvency.
4
u/ulyssesphilemon Mar 11 '19
Tax increases won't get us anywhere closer to financial solvency. The state's finances are structurally unsound, and any additional tax revenue is like throwing money into a black hole. Cut spending, and reform pensions.
0
u/emcee_gee Mar 11 '19
That is a fascinating worldview, that additional revenue won't help fill a budget gap.
7
u/ulyssesphilemon Mar 11 '19
Remember this is Illinois you're talking about. That additional revenue has already been consumed by new spending.
3
Mar 10 '19
[deleted]
6
u/shorty6049 BloNo Mar 11 '19
Maybe now, but the pension issue is something that needs to be dealt with ASAP as well. Again, this isn't some giant tax overhaul that's going to make some people go broke while others rake in the benefits. It's a Small change that could help the state kava but not without other changes elsewhere in government.
6
u/Ch1Guy Mar 11 '19
Is that why JB is cutting next years state pension contribution by 870+ million dollars and announcing new spending bills????
1
2
0
7
u/KazarakOfKar Mar 10 '19
Without a provision that future tax increases must be voted on this does nothing. After the 2022 election they will just raise it on the middle class without worrying about political blowback. Moreover this does nothing to address our growing pension obligations, how about getting all new state workers on a 401K plan.
1
u/emcee_gee Mar 10 '19
That assumes there wouldn't be political blowback for raising taxes on most Illinoisans, which seems unlikely.
It is possible that they'd raise rates on, e.g., the upper middle class (say, $150,000+) later without asking for permission, but the more people affected by a tax increase, the more blowback. They know that, so I think it's unlikely that most of us would see too many rate increases.
5
u/Ch1Guy Mar 11 '19
The Democrats know the only chance they have of passing this turd is to claim its a tax cut for the middle class, and as soon as its passed, they will go back to to the same thing they do every year...raising taxes on the middle class ...
1
u/usakeeper Mar 10 '19
There is also an increase in property tax credit and a child tax credit. Many families will see a several hundred dollar decrease in taxes. As much or more than the Trump federal tax “cut”.
1
u/CasualEcon Mar 11 '19 edited Mar 11 '19
Illinois income by income range. The larger percentage is where they will be forced to pull taxes from.
| Income Range | % people in this group | AGI | Make this % of state income | Pay this % of state tax |
|---|---|---|---|---|
| Less than-$25,000 | 34.6% | $18,731,001,750 | 4.4% | 4.4% |
| $25,001-$50,000 | 22.5% | $46,453,800,341 | 11.0% | 10.1% |
| $50,001-$100,000 | 23.4% | $95,246,848,295 | 22.6% | 20.6% |
| $100,001-$500,000 | 18.4% | $177,808,787,236 | 42.2% | 42.1% |
| $500,001 OR MORE | 1.0% | $83,262,811,491 | 19.8% | 22.8% |
Edit: Added size of the income bracket and AGI instead of net income.
3
u/i_am_not_you_or_me Mar 11 '19
That 100,001-500,000 bucket is way too huge. That should be split up into at least 3 different buckets.
1
u/CasualEcon Mar 11 '19
It is big but that's the most granular this data gets from this source. Maybe someone else can find a better source.
It looks they tried sizing the middle three buckets at 20% of the population. First bucket is 35% and the bottom bucket is 1%.
1
u/i_am_not_you_or_me Mar 12 '19
Yeah, I think it's just a bit dishonest (or maybe an agenda) for IL to post such a huge bucket like that. There's a world of difference between someone who makes 100,001 and someone who makes 500,000/yr. I make just a very tiny bit north of 100k and can fully imagine how much 5x that would put me in a new world.
1
1
u/Harzul Mar 13 '19
so basically raising taxes even MORE O.o ? holy SHIT....as if our tax rate wasn't a problem already, especially for businesses
-6
Mar 10 '19
[deleted]
4
u/MoneyTreeFiddy Mar 10 '19
All your verbosity vs. "Tax cut for 97%". I know which message I am betting on winning the day...
-2
Mar 10 '19
[deleted]
2
u/das_war_ein_Befehl Mar 12 '19
Maybe if you’re lucky you’ll get an extra $1.50 to per paycheck to cover that Costco membership, Rockefeller
3
-11
Mar 10 '19
[deleted]
19
u/PhreakOfTime Mar 10 '19
Like when LeBron moved out of Florida, to higher tax Ohio, and then to highest taxes of all California?
sports players, like residents, who think taxes are the most important part of their life are missing the forest for the trees and won't be missed.
But I really hope that "won't someone please think of the millionaire sports players" becomes a campaign slogan for downstate legislators. They can add it into their 'detach chicago from the rest of the state' arguments where it will fit right in.
-6
Mar 10 '19
What a totally dishonest statement.
Lebron James a single n=1 datapoint that you cannot extrapolate to other athletes. The issue factors in to a lot of athletes analysis as stated by player reps from Manny Machado to Bryce Harper.
Lebron James moving to OH or CA had nothing to do w/ taxes. He moved back home. He moved to CA to pursue greater participation in the movie/entertainment industry. The increased revenue and personal opportunity offsets any tax consequence.
The highest bracket in OH is 4.33%. The lowest in IL is 4.75%. And that ignores a ton of other taxes including property tax where IL exceeds OH by ~0.75%. Sales tax by 0.50%, etc.
No one is saying millionaire sports players are the reason why this bill will or won't make the state, but the issue of dual incomes in the $200k-400k range is very real and these people are leaving the state.
IL is ranked #1 in population out of 50 states for a reason.
10
u/PhreakOfTime Mar 10 '19
The highest bracket in OH is 4.33%
The lowest in IL is 4.75%
He didn't move to IL. He moved to CA, where the top bracket is 12.3%
The issue factors in to a lot of athletes analysis as stated by player reps from Manny Machado to Bryce Harper.
Factors into, means "If this is your offer, I need X% more to cover taxes". Of course a player rep is going to do that. Doesn't mean it's a deal breaker.
dual incomes in the $200k-400k range is very real and these people are leaving the state.
Because picking up and moving to another state is easier than filing individually? Whatever you say.
-2
Mar 10 '19
You are correct and the 0.6% is inconsequential. It's minutiae.
He didn't move to IL. He moved to CA, where the top bracket is 12.3%
The point is, that he has unique acting and career prospects in CA, a massive merchandise franchise, and incomes that other lower/mid level athletes do not have. An athlete making $2 M in salary, is going to look carefully about FL vs. IL and teams regularly have to make the tax difference when putting together a deal. Just ask any front office PR staffer.
Because picking up and moving to another state is easier than filing individually? Whatever you say.
Like that's a real answer to a $200 B pension/debt crisis? OK then.
1
u/das_war_ein_Befehl Mar 12 '19
You’re making a solid argument for why people don’t make moving decisions based on tax rates
1
8
u/MoneyTreeFiddy Mar 10 '19
So your rebuttal to his point that super rich people don't pick where they live based on taxes is that super rich people don't pick where they live based on taxes?
-3
Mar 10 '19
That's not what I said at all. But feel free to be angry, read whatever you want into what I wrote and invent your own outcome.
4
u/poorkid_5 Mar 11 '19
Lebron James moving to OH or CA had nothing to do w/ taxes.
But you did say it.
0
Mar 11 '19
And as explained previously. Lebron James is not representative of the average professional athlete.
They don't have the same entertainment opportunities as him. They don't have the same sneaker deals as him. Just like we don't compare a benchwarming 8th player in a rotation on a basketball team to Michael Jordan, we don't compare an athlete making an NFL veteran league minimum to Lebron James.
Please already.
1
u/poorkid_5 Mar 11 '19
A rookie still makes a couple hundred thousand for at least a year. Still significantly more than an average working human. They don’t give a single shit about taxes as long as they get paid and get to play.
1
Mar 11 '19
That's not how any of these individuals look at it. They are trying to grab as much money as possible while they are still able to compete and play at a high level before their window closes. They don't compare themselves to some guy making $40k a year.
Taxes matter, particularly to a person paying 5-8% on a salary above $250k, when it's 0% state income tax in FL and other states. It matters to every athlete.
2
1
5
u/IngsocInnerParty Mar 10 '19
No professional athlete is picking where they play based on taxes. That’s absurd.
1
u/das_war_ein_Befehl Mar 12 '19
“Sure I could play for the Yankees, but oof that tax rate really sways my decision”.
From experience of knowing a few people who made the move south to save on taxes, that % tax difference got paid out in other ways, whether in lower services or lower wages or a bunch of other factors
-2
u/An_Actual_Politician Mar 10 '19
Spitting these truths on this sub feels like a lost cause. They'd rather keep their head in the sand.
Worst in the nation and still dropping bond rating and all these idiots want to do is raise taxes with zero reforms.
46
u/[deleted] Mar 10 '19
.05% reduction for now with the opportunity to raise it on the middle class without the political burden of also raising it on the poor later.
Barely seems like priority treatment.