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April 30, 2018

*New tax idea: The Center for Tax and Budget Accountability is offering up models for a graduated tax system in Illinois.

The liberal-leaning group issued a report Monday saying Illinois’ current tax policy is “unfair” because the 4.95 percent flat tax rate for individuals imposes “a much higher tax burden as a percentage of income on low- and middle-income households than on high-income households.”

The group said Illinois could adopt a graduated income tax that would result in a cut for 98 percent of taxpayers and raise rates on people with incomes of $300,000 and above. The proposal would raise an additional $2 billion for the state, the group says. 

Under one model, the state would keep its current 4.95 percent rate for income of up to $300,000. It would raise the rate to 7.5 percent for income between $300,000 and $400,000; hike it to 8 percent for income between $400,000 and $500,000; increase it to 9.25 percent for income between $500,000 and $1 million. Income above $1 million would be taxed at 9.85 percent. The top rate is what is used in Minnesota.

In that plan, a $300 credit would be applied to lower incomes, and that amount would get smaller as a taxpayer's earnings got higher.

A second model from the group would levy a 4.5 percent tax on income up to $100,000; 4.95 percent on income between $100,000 and $300,000; 8 percent on income between $300,000 and $500,000; 9.25 percent on income between $500,000 and $1 million; and 9.85 percent on income of $1 million or more.

The group said under that model, anyone making under $314,000 of taxable income would see a tax cut of up to $450. 

A federal-style graduated income tax is far from a done deal, of course. Democratic governor candidate J.B. Pritzker supports adopting one but hasn't proposed specific rates, and Democratic House Speaker Michael Madigan recently endorsed the idea.

But overhauling Illinois' income tax system would require a change in the state Constitution, which takes the approval of three-fifths majorities in the House and Senate before putting it to voters for ratification.

Source: Chicago Tribune