The idea of moving Illinois to a graduated income tax has been attracting a great deal of attention lately, but opponents like Senator McConnaughay are less than thrilled with the idea.
Proponents argue that a graduated tax would be more fair than the current flat rate tax because higher income persons would pay a higher tax rate while lower income persons would pay less.
Opponents disagree, saying that the graduated tax discussion is a thinly disguised attempt to increase taxes on most Illinoisans and a way to keep the temporary tax increase enacted in 2011 permanent.
McConnaughay has affirmed her support of the flat tax and opposition to amending the Illinois Constitution to allow for a graduated or progressive income tax through her sponsorship of SR 383.
Thirty-four States plus the District of Columbia have graduated income taxes. The national Tax Foundation compiles information on tax rates across the country that can help the public determine how a graduated tax might play out in Illinois.
While proponents claim that only those earning more than $150,000 a year in Illinois would pay higher taxes, that has not been the case in other states. Taxpayers with incomes of $50,000 or more pay a higher rate than Illinois’ current 5% rate in two-thirds of the states that have a graduated tax.
For a couple earning $80,000, almost 60% of states impose a rate of 6% or more, while only nine of the states impose a rate lower than Illinois' current 5% tax rate.
In many states, a graduated income tax simply means slightly lower rates for those at the bottom of the income scale, but higher rates for middle income earners. For example, in Arkansas anyone earning $34,000 or more pays the maximum 7% rate. In Georgia, couples earning more than $10,000 pay the top rate of 6%. In Idaho, couples pay 7.4% on any income over $20,700, while in neighboring Iowa an 8.98% rate is imposed on both individuals and couples earning more than $67,230.