Saying the Fair Tax amendment is controversial is akin to calling Tom Brady a pretty good quarterback.
The proposed constitutional amendment that will appear on the Nov. 3 ballot in Illinois will either help the state get back on a good financial track or give legislators free rein to raise taxes, depending on who’s doing the opining.
Bryce Hill said even the title of the referendum is inaccurate.
“It’s more of a marketing gimmick than an actual reflection of what a fair tax actually means,” said Hill, senior policy analyst at the Illinois Policy Institute, a libertarian political think tank.
The ballot initiative would amend the Constitution to allow legislators to implement a graduated income tax rate rather than the flat tax currently in place. While it doesn’t call for increased revenues, few deny that is the idea behind it.
The official pitch is one embracing fairness in taxation, in which those with higher incomes share more of the burden. And it just so happens that the state is in dire financial straits.
“Our current tax system is fundamentally unfair. It allows millionaires and billionaires to pay the same tax rate as our middle- and working-class families, our nurses, grocery store clerks and janitors,” said Lara Sisselman of Vote Yes for Fairness, an ad hoc group supporting the amendment. “It disproportionately benefits millionaires and billionaires while placing the burden on working families.”
Illinois Farm Bureau sees things differently.
“We have a long-standing policy that our members feel that the flat tax is a much fairer way to tax income,” said Kevin Semlow, who tracks state legislation for the IFB. “The more you make, the more taxes you pay.”
The newest Illinois Constitution — drawn up at the Constitutional Convention of 1970 — requires a flat-rate structure for income taxes. That means every taxpayer pays the same percentage of net income. The change to the constitution would allow a graduated income tax, in which high earners would be taxed at a higher rate.
Supporters argue most states with income tax have a graduated rate in place, as does the federal government, which taxes individuals at rates ranging from 10% to 37%. They believe those with higher income should shoulder more of the tax burden. Currently, all Illinois workers are taxed by the state at a 4.95% rate.
“It’s not fair for the working-class person because our middle- and lower-
income families pay 14% of their income in taxes, while the top 1% pay 7%,” Sisselman said. “It doesn’t really affect how they live their day-to-day lives. That 4.95% to a middle-income family is a lot more than to a millionaire.”
The proposed amendment doesn’t address the subject of tax increases. But opponents believe if it is passed, it will open the door for higher taxes, not just for the rich, but eventually for every wage earner.
“It gives them much more political freedom to raise taxes without fallout from voters,” Semlow said.
Advocates draw an opposing view.
“I disagree with the claim that this gives the Legislature more freedom,” Sisselman said. “This doesn’t give them any new power. The only difference is now they don’t have the ability to raise taxes more on people who make more.”
Farming could be affected only sporadically. That’s because incomes vary greatly from year to year.
“A farmer is a really good example of why this makes sense,” Sisselman said. “If a farmer doesn’t have a good year they’ll be taxed at a lower rate. If they make more than $250,000 a year — and I believe the overwhelming percentage falls under that threshold — the money over $250,000 will be taxed at a higher tax. But they were very fortunate that they were very successful that year, and they can afford to pay their fair share to help make our state a better place.”
Like others who oppose the amendment, Hill believes it will lead to higher taxes on all wage earners.
“In the short term they say they’re going after higher earners. But with two record tax hikes in the past 10 years and 20 years without a balanced budget, we can see that tax promises in Illinois are made to be broken,” he said. “Eventually, lawmakers are going to come to the well of middle-class and lower-class-income Illinois to ask for more revenue as well.”
He points to previous revenue-generating plans including the state lottery, temporary toll roads and legalization of gaming. Those initiatives failed to live up to expectations.
“The fair tax messaging helps proponents,” Hill said. “But Illinoisans living here for a while know it is difficult to trust Springfield.”
Farm Bureau usually aims its lobbying at politicians. But with this issue, it is reaching out to individuals, since the legislature has already voted to put it on the ballot.
“Our focus is encouraging farmers and voters in general to vote no on the ballot initiative,” Semlow said. “It goes back to taxation without representation. If you can target people who are going to have only a small impact on this, you can minimize the outcry of those voters, and lessen that impact.”
One thing both sides agree on is that the vote will be close.
“Polling indicates the majority of Illinoisans are undecided, with support and opposition pretty even,” Sisselman said.