Pritzker ‘fair tax’ amendment would allow lawmakers to impose new types of income taxes

Despite already shouldering one of the nation’s highest total tax burdens, middle-class Illinoisans would be exposed to extra income taxes under language proposed by Gov. J.B. Pritzker.

Deleting one sentence from the Illinois Constitution will make Illinoisans vulnerable to extra charges atop their income taxes under a constitutional amendment championed by Gov. J.B. Pritzker.

The Illinois Constitution currently bars the state from imposing more than one type of tax on income. But Pritzker’s amendment scraps that language, allowing Illinoisans to be taxed more than once on the same dollar earned. The Senate Executive Committee held a hearing April 10 and by a 12-5 vote passed the amendment, SJRCA 1. It next goes to the Senate floor.

If Pritzker’s amendment becomes part of the Illinois Constitution, the state could adopt an extra income tax surcharge dedicated entirely to pensions, for example. A quarter of the state budget is currently consumed by pension costs, and a 2018 report published by the Federal Reserve Bank of Chicago suggested a 1 percent statewide property tax to pay for soaring pension liabilities. Pritzker pitched new pension obligation bonds to investors earlier this year.

Specifically, the amendment to SJRCA 1 deletes this line from the Illinois Constitution: “At any one time there may be no more than one such tax imposed by the State for State purposes on individuals and one such tax so imposed on corporations.”

Pritzker’s amendment offers no protection to replace this language, simply reading, “The General Assembly shall provide by law for the rate or rates of any tax on or measured by income imposed by the state.”

Todd Maisch, president and CEO of the Illinois Chamber of Commerce, raised concerns about this language in committee testimony. “If somebody decides there’s a need for another income tax increase, I think it’s going to look a lot like a ‘special assessment for public safety.’ It’s going to be a ‘special tax dedicated to education.’ It’s going to go under that guise,” Maisch said.

“It also allows [for] taxation of certain kinds of income a second or third time,” he added. Maisch referenced carried interest and agriculture as two examples of income that could be subject to special additional taxation should this protection be eliminated.

If the Illinois General Assembly passes Pritzker’s amendment, voters would need to approve the change at the ballot box in 2020. The amendment would require 60 percent approval from those voting on the question, or simple majority approval from all Illinoisans voting in the election.

Thankfully, there is already a reasonable path to pension reform in the General Assembly: SJRCA 9 and HJRCA 21, which would allow for similar reforms as those passed by Illinois Democratic supermajorities and signed into law by Democratic Gov. Pat Quinn in 2013. These amendments would protect already-earned pension benefits but allow for changes to future, unearned benefits – such as the current 3 percent compounding benefit increases throughout retirement regardless of inflation.

Instead of opening the door for punishing new income taxes, Pritzker needs to address the state’s spending problem at the source.