Just ahead of Gov. Pat Quinn's budget address, state Sen. Don Harmon (D-Oak Park) unveiled the rate structure Tuesday for his progressive state income tax proposal.
Under his plan, taxes would be reduced for 94 percent of families in Illinois, the state senator said.
Currently, Illinois has a flat income tax rate of 5 percent that applies to everyone, regardless of their base income. Come January, that rate is scheduled to rollback to 3.75 percent if lawmakers do not take action to prevent the 2011 temporary income tax hike from sunsetting.
Back in May, Harmon sponsored a resolution, SJRCA 40, seeking to amend the Illinois Constitution and remove a provision that requires income to be taxed at a non-graduated rate. The companion legislation in the House, HJRCA 33, is sponsored by State Rep. Naomi Jakobsson (D-Urbana).
Under Harmon's proposed progressive tax rate measure, which he plans to introduce this week, income up to $12,500 would be taxed at a rate of 2.9 percent; income between $12,500 and $180,000 would be taxed at 4.9 percent; and income greater than $180,000 would be taxed at 6.9 percent.
Based on the current 5 percent income tax, the graduated tax rates would “result in a tax cut for 94 percent of Illinois households,” the state senator said.
Harmon noted that his proposal is "completely compatible" with House Speaker Michael Madigan's recently proposed constitutional amendment that would raise the state's income tax for people earning more than $1 million annually. All income over $1 million would be taxed by 3 percentage points, which is estimated to bring in an extra $1 billion for schools each year.
Harmon argues that the state would be in worse shape without a progressive income tax.
“We can continue an unfair, regressive flat tax at 5 percent or we can cut government services by 20 percent across-the-board,” Harmon said. “Those are the two choices. Neither of them is at all popular. This is a third way.”
But State Sen. Matt Murphy (R-Palatine) claims that Democrats in the state legislature "are creating a doomsday scenario to try to make it seem unreasonable to let (tax rates go down).”
In order for a constitutional amendment to appear on the November ballot, the state legislature would have to approve the legislation with a three-fifths vote in both chambers before May 4.
Check back with Progress Illinois later today for full coverage of the governor's budget address.