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Ill. GOP Leaders Seek To Withdraw Graduated Tax From Ballot

By Paul Williams · May 18, 2020, 7:04 PM EDT

Illinois Republicans introduced a resolution Monday seeking to withdraw a graduated income tax question from the November ballot, arguing that switching from a flat tax to a tiered tax would hamper the state's recovery from the novel coronavirus pandemic. 

The resolution would remove a Nov. 3 ballot question that will ask voters to trigger a switch from a 4.95% flat personal tax income tax to a graduated income tax. Republicans are outnumbered by Democrats in the state General Assembly that approved the question last year, but House Republican Leader Jim Durkin, R-Western Springs, said the state should scrap the measure due to the economic downturn Illinois is facing from the virus.

During a press conference, Durkin, a frequent critic of the ballot question, said that a graduated income tax would "slam the brakes" on the state's economic recovery from the pandemic by driving high-earners and businesses out of Illinois and into more tax-friendly states at "the worst possible time."

If the question is approved at the polls, it would remove the state constitution's prohibition on a tiered income tax. That change would enable corresponding legislation, contingent upon the question's passage, that would set new personal income tax rates from 4.75% to 7.99% and increase the corporate income tax rate to 7.99% from 7%.

Supporters of the question, including Democratic Gov. J.B. Pritzker, have said the constitutional amendment would make the state's income tax regime more fair by raising taxes on those who earn more than $250,000 annually, and cutting taxes for some of the state's lower earners.

In a statement to Law360, Senate President Don Harmon, D-Oak Park, signaled that the Democratic leadership wouldn't give the Republican plan much attention.

The amendment "promises tax relief to small businesses and middle-class families," Harmon said. "I don't know why in the middle of a pandemic they would try to take that option away."

A representative for House Speaker Michael Madigan, D-Chicago, didn't respond to requests for comment Monday, However, his spokesman told Law360 last month that there wasn't "any rational reason" to repeal the question after the libertarian-leaning Illinois Policy Institute made a similar plea amid the pandemic.

But Senate Deputy Minority Leader Dan Brady, R-Normal, said during the press conference that COVID-19, the respiratory illness caused by the virus, has vastly altered the state's economic environment since last May when the question was approved.

A graduated income tax would be a burden on citizens and businesses as they try to recover from the harm caused by the pandemic, as many businesses around the country have been shuttered to stop its spread, he said.

"Things have changed since the Democrats first put this initiative forward, and we're calling on them to realize the challenges Illinois citizens are facing, and remove this initiative from the ballot," Brady said.

Lawmakers will reconvene in Springfield on Wednesday during a special session after being away the last couple of months to "address fiscal and COVID-19 related issues," according to a Wednesday statement from Harmon. Like many states, Illinois is facing budget challenges as certain businesses have been ordered to temporarily close to curb the spread of the virus.

When asked about the resolution's prospects of passage, Durkin said during the press conference that he just wanted lawmakers to hold "an up-and-down vote" on the measure. His spokeswoman Eleni Demertzis told Law360 that the resolution was sent to the House clerk and awaiting official filing.

In a statement to Law360, Pritzker spokeswoman Jordan Abudayyeh accused the Republicans of using the pandemic to prevent voters from deciding whether the state's income tax structure should be changed.

"If the Republican leaders believe so strongly that the wealthiest Illinoisans can't afford to pay their fair share, then they should make their case to the voters instead of advocating for them to be removed from the process," Abudayyeh said.

The Vote Yes for Fairness campaign, which is backing the ballot question, said in a statement that the graduated income tax is needed "more than ever" to bring in more revenue for the state as it digs out from the economic hole created by the pandemic.

"The fair tax is about updating our outdated tax system to one used by a majority of states and the federal government that works for all Illinoisans, not just the wealthy few," the campaign said.

Pritzker's office estimated in April that the virus had created a $2.7 billion shortfall in the current fiscal year's budget, and has lowered revenue projections for the upcoming fiscal year 2021 by $4.6 billion.

Illinois will face a budget gap next year regardless of whether the question passes, according to the revised forecast. The state will currently face a $6.2 billion budget gap if the ballot question passes, and a $7.4 billion shortfall if the question fails, the forecast said.

Jared Carl, president of the Illinois Business Alliance, a business advocacy group, agreed with the move to remove the question. The group has repeatedly called for the question to be tossed from the ballot since the onset of the pandemic, and Carl said Monday that it would be "morally and economically wrong" to raise taxes on small businesses at this time.

"The most important thing Illinois can do to help employers and small businesses recover from Gov. Pritzker's economic shutdown is to remove the threat of a tax increase and give business owners a sense of stability and confidence as they work toward rebuilding," he said.

--Editing by Neil Cohen.

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