Zip code breakdown shows where the money is in Gov. J.B. Pritzker’s graduated income tax plan

Below is an article posted to the Chicago Tribune by contributor Dan Petrella on July 22nd, 2019. Link to original article may be found HERE. Photo credit to Stacey Wescott of the Chicago Tribune. 

Democratic Gov. J.B. Pritzker has pitched his graduated-rate income tax plan by emphasizing that only a tiny sliver of Illinois residents would pay more if voters approve a change to the state constitution in November 2020.

Those residents, as might be expected, are concentrated in a handful of wealthy enclaves in the city and suburbs. In fact, a quarter of all taxpayers statewide who would be hit by the higher rates — those earning more than $250,000 a year — reside in just 15 of the state’s more than 1,500 ZIP codes, covering places like Lincoln Park, Wilmette, Barrington and Elmhurst, according to a Tribune analysis of Illinois Department of Revenue income tax data from 2016, the most recent year available.

In Lincoln Park, for example, 14% of taxpayers — 4,757 filers, the most in any ZIP code — earned more than $250,000. That includes 1,010 who earned enough to qualify for the top rates under Pritzker’s plan, which would tax individuals earning more than $750,000 and couples earning more than $1 million at 7.99% of their total income. The current rate is 4.95% for all taxpayers.

In some tony suburbs, the concentration of high earners is even greater. In both north suburban Winnetka and west suburban Hinsdale, more than 29% of taxpayers — 2,740 of filers in Winnetka and 2,288 in Hinsdale — would be affected by the higher rates that kick in at $250,000.

Overall, roughly 85% of those who would see higher tax rates under Pritzker’s plan live in Cook County and the five collar counties, which are home to about 66% of the state’s population. That means a disproportionate amount of the new revenue generated by the tax hikes would come from the Chicago area.

While the concentration of wealth in Chicago and the suburbs is well-known, the data, obtained through the state’s Freedom of Information Act, provide another indication that the area will be the main battleground in the fight over the proposal to do away with the Illinois Constitution’s flat tax requirement, as well as in the Democratic Party’s effort to maintain its supermajorities in both chambers of the Illinois General Assembly.

The issue will play out not only in the vote on the constitutional amendment itself but also in a handful of races in suburban House and Senate districts, said Chris Mooney, a political science professor at the University of Illinois at Chicago.

“Those are some of the few districts where there really is competition between the two parties in the general election,” Mooney said. “These are districts that are traditionally Republican districts that Democrats have taken … and so by definition they’re going to be competitive.”

The GOP will use the graduated income tax as a “wedge issue” in seeking to win back those seats and cut into the Democrats’ supermajority control of the legislature, he said.

Republicans and other graduated income tax opponents already are drawing on widespread distrust of state government after decades of scandal, fiscal mismanagement and political gridlock to counter the Democrats’ sales pitch.

Pritzker and his allies argue that the graduated tax will bring fiscal stability to the state, provide some relief to most taxpayers and make wealthy residents — including the billionaire governor — pay their fair share.

Complicating the political calculus, many of the legislative districts that have been trending toward Democrats in recent elections include ZIP codes where higher percentages of residents would see their taxes go up under the governor’s plan.

Freshman Rep. Anne Stava-Murray of Naperville, who recently abandoned plans to challenge U.S. Sen. Dick Durbin in next year’s primary and instead will seek a second term in the Illinois House, was one of eight Democrats who flipped a GOP seat in the 2018 election. She defeated Republican incumbent David Olsen of Downers Grove by 930 votes.

In her home ZIP code, about 8% of taxpayers earn more than $250,000 a year, according to state tax data, though Stava-Murray said an analysis provided by the governor’s office shows the percentage is lower — about 5% — in her legislative district. That’s still higher than the 3% of taxpayers statewide Pritzker says would pay more under his plan.

Stava-Murray, who voted in favor of the proposed amendment and the rates that would go into effect if voters approve it, said she sees it has her responsibility to cut through the “misinformation” being put out by opponents and educate voters about why a graduated tax system is necessary to fix the state’s financial problems.

“I can assure them that the tax plan that I voted on, that I voted for, ensures that 95% of my voters will not see an increase in their taxes, whereas if we do not change the flat tax system, we have to change 100% of the people’s taxes to cover the budget deficit,” she said.

While Stava-Murray voted in favor of both components of the tax plan, a handful of Democrats voted to put the proposed amendment on the ballot but opposed the rate structure.

The proposed amendment required support from three-fifths majorities in the House and Senate, so nearly every Democrat had to vote in favor for it to pass. The rates legislation required only a simple majority, meaning House Speaker Michael Madigan and Senate President John Cullerton could afford to have a few potentially vulnerable members vote against it.

One of those members was Democratic Rep. Jonathan Carroll of Northbrook, a holdout who voted in favor of the proposed amendment only after Pritzker agreed to work with him on creating a task force to study ways to reduce the state’s high property tax burden.

About 13% of taxpayers in Carroll’s home ZIP code — 2,728 filers, including more than 300 who earned more than $1 million in 2016 — would see higher rates if the amendment is approved, according to state tax data.

“The thing with the amendment, for me, is it’s now up to the voters of Illinois,” Carroll said.

As for whether he’ll vote in favor of the amendment in 2020, he said, “I don’t know what I’m having for lunch tomorrow.”

Carroll said the rate structure “still needs some more work.” However, it would be politically perilous for Democrats to make any changes to the rates before voters weigh in.

In criticizing the graduated income tax, House GOP leader Jim Durkin of Western Springs pointed to tweaks the majority party made during the spring session to Pritzker’s original plan that raised the top rate and lowered the income threshold where it kicks in for single filers.

Those changes underscore the Republicans’ argument that if voters approve the amendment, Democrats will be able to change the tax rates at any time, Durkin said.

“It gives a blank check to those who are in the majority to decide how much spending they want to do in any legislative year,” he said.

That could prove a strong argument given the longstanding skepticism over promises from politicians in Springfield, Mooney said.

“If you don’t have that reservoir of trust, people are going to be more hesitant to accept” the Democratic position that the rates will only affect the wealthy, he said.

Previewing the argument Republicans will make repeatedly from now until November 2020, Durkin said the middle class will have to make up the difference when wealthier residents leave the state to avoid paying higher taxes.

In the Republican leader’s home ZIP code, nearly 21% of taxpayers — 1,251 filers — would be affected by the higher rates. In comparison, the increases would affect fewer than 1% of taxpayers in Madigan’s Southwest Side ZIP code.

Downstate, where the GOP holds the bulk of the seats in the General Assembly, there are only a few pockets where more than 3% of taxpayers earn more than $250,000, including ZIP codes in and around Peoria, Decatur and Springfield.

In order for the graduated tax to go into effect, the amendment must be approved by 60 percent of those who vote on the referendum question or a majority of those voting in the November 2020 election. If it’s approved, new tax rates approved by legislators this spring would kick in Jan. 1, 2021.

Single and joint filers would be taxed at 4.75% on the first $10,000 of income, 4.9% on income between $10,000 and $100,000, and 4.95% on income between $100,000 and $250,000.

For single filers, the rates would be 7.75% on income between $250,000 and $350,000, and 7.85% on income between $350,000 and $750,000. For those earning more than $750,000, their total income would be taxed at 7.99%.

Joint filers would be taxed at 7.75% on income between $250,000 and $500,000, and 7.85% on income between $500,000 and $1 million. The rate would be 7.99% on total income for those earning more than $1 million.

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