Illinois Takes Step Closer to Graduated Income Tax Rates

Illinois took one more step closer to adopting graduated personal income tax rates. State lawmakers ended the last week of their regular session by:

  • agreeing to put a constitutional amendment before the voters authorizing graduated rates; and
  • passing legislation that would establish those rates.

Gov. J.B. Pritzker pushed for the legislation and constitutional amendment as part of his “Fair Tax Plan.” Both developments provide early legislative victories to the new governor.

What Rates Would Taxpayers Pay?

The tax rates would range from 4.75% up to 7.99% based on a taxpayer’s net income. The top rate applies to:

  • taxpayers who do not file a joint return and have net income over $750,000; and
  • taxpayers who file a joint return and have net income over $1 million.

Why Is the Constitutional Amendment Necessary?

The Illinois Constitution currently requires taxation of income at a non-graduated or flat rate. The amendment would:

  • strip out the “non-graduated rate” language; and
  • give the Illinois General Assembly power to set the rate or rates.

When Will the Governor Sign the Rate Legislation?

The Office of Governor Pritzker said that he has not set a schedule for signing the rate legislation.

What Is on the Horizon for Illinois Residents?

The constitutional amendment will appear on the November 2020 general election ballot. It will need approval by 60% of Illinois voters.

Illinois residents were treated to a steady diet of media for and against the graduated rate plan. Once the governor signs the rate legislation, residents should expect a long media campaign for and against the constitutional amendment.

If Illinois voters approve the constitutional amendment, the new rates would take effect January 1, 2021.

By Tim Bjur, J.D.

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