The editors of the Wall Street Journal, unsurprisingly, are opposed to Illinois’s repeal of its present flat income tax:
A supermajority of Democrats in the Illinois Legislature voted last week to place a constitutional amendment on the November 2020 ballot establishing a graduated income tax. Public unions have long wanted to enact a progressive tax to pay for increased spending and pensions, and they think the political moment has finally arrived.
Democratic Gov. J.B. Pritzker says a progressive tax will hit only the wealthy, which he defines as individuals who earn more than $250,000. He also claims the middle class will get a tax cut. Don’t believe it. There aren’t enough wealthy in the state to pay for his spending promises, so eventually Democrats will come after the middle class.
To my eye the more significant passage in their editorial is this:
Illinois has no fiscal room to fail. Since 2015 Illinois’s GDP has grown a mere 1% annually, about half as fast as the U.S. and slower than Ohio (1.4%), Indiana (1.7%), Wisconsin (1.7%) and Michigan (2.1%). About 11% of Illinois residents have left since 2001, the second biggest state exodus after New York.
Taxpayer flight has been accelerating as income and property taxes have risen. Chicago’s diverse economy once attracted young people from across the Midwest, but the Windy City’s population is shrinking and Illinois was one of only two states (with West Virginia) to lose millennials between 2010 and 2015. A progressive tax would be a gift to Florida and Texas, which will vote in November on a constitutional amendment to prohibit an income tax.
Both Illinois’s and Connecticut’s populations are declining but Illinois’s decline is deeper even without a graduated income tax.
I am not unalterably opposed to a graduated income tax in Illinois but I am skeptical. To my knowledge no serious study of its economic impact has been done and neither the governor nor the legislators know whether it will cause state revenues to increase, decrease, or remain the same. The cold equation that I’m looking at is that 4.99% of $750,000 is greater than 7.99% of nothing.
I would be more supportive of the amendment if it were coupled with another amendment to empower the legislature to alter public pensions not yet payable since I’m convinced that Illinois’s fiscal problems cannot be solved without such an amendment.
