As Gov. Pat Quinn readies his FY 2011 budget proposal before delivering it to the General Assembly next Wednesday, his administration is soliciting potential budget fixes from regular citizens. As of yesterday, over 6,000 people had submitted comments to the state website, some more useful than others. We have one of our own: The governor's office should investigate how the wealthiest individuals in Illinois are apparently shielding huge amounts of income from the state.

Tax reform was one of the most important points of contention in the Democratic gubernatorial primary this year. Dan Hynes consistently criticized Gov. Quinn's income tax increase proposal, instead calling for a constitutional amendment that would create a graduated system of higher tax rates for those making more than $200,000 annually. But Hynes' revenue projections, according to several reports, appeared off by several billion dollars. While the campaign never explained the basis for the discrepancy, our suspicion was that Hynes may have over-estimated the amount taxable income reported by Illinoisans who earn more than $1 million annually.

We previously posted stratified income tax figures from the Illinois Department of Revenue (IDOR) for FY 2007 -- the last and only year for which this type of data is currently available. The base income of people in Illinois who earn greater than $1 million was just over $129 billion. After deductions, that figure drops 55 percent, all the way down to $57.7 billion. As the graph above shows, the ratio of base income to taxable income for these highest-earners is out of line with those making between $200,000 and $1 million per year (whose taxable income is, on average, about 20 percent less than their base income).

According to our back-of-the-envelope calculations, we think Illinois could be losing over $1 billion annually as a result -- this in a state that already has a rock-bottom income tax rate.  Yet we've consulted multiple budget experts about the issue and none can identify exactly how the rich are shielding so much of their cash from the state coffers. It's possible many are dumping portions of their income in S-Corporations, which are taxed at a lower rate. But we haven't been able to pin down a definitive answer yet.

An IDOR spokesperson tells us the agency is preparing similar, stratified data for FY 2008, which they will release (and post online) once budget negotiations kick into full gear in the next month. Once those numbers are available, we'll be able to cross-check the data to make sure that 2007 wasn't an outlier. In the meantime, the Quinn administration should dig into these numbers. If anyone has the access and capacity to determine what's going on here, it's the governor's office.

Experts from across the political spectrum agree that to close the state's deficit next year, the state legislature is going to have to approve a mix of spending reductions and revenue enhancements. While passing a progressive income tax amendment this year is pretty much out of the question, it seems like common sense to at least ensure the wealthy are paying their fair share under the current system.