In a historic vote, the Illinois House on Monday agreed to ask voters to change the 1970 state constitution by authorizing a graduated-rate tax based on the size of income and repealing the currently mandated flat-rate income tax.
The move came on a 73-44 party-line vote, two votes more than the bare minimum needed for approval. It represented a significant victory for first-term Democratic Gov. JB Pritzker, who campaigned for election on the concept of taxing wealthier incomes at a higher rate as part of an overall plan to deal with Illinois' ailing finances. Pritzker hailed the vote as "a giant leap forward for the middle class."
The proposed amendment won't go before voters for ratification until the general election in November 2020. It would require approval from 60% of those voting on the issue, or a majority of those voting in the election, to be adopted.
The action by the Democratic-led House, joining with a Senate vote May 1 that was approved by all 40 Democrats in the chamber, sets the stage for a lengthy and contentious battle between advocates and opponents of a graduated-rate tax system.
Pritzker has promised that lawmakers will adopt income tax rates that would provide some relief or at least remain the same for 97% of the state's wage earners, those who make $250,000 a year or less. The Senate earlier this month approved legislation setting new graduated rates that fit Pritzker's outline, but the plan is still awaiting a House vote.
"The commitment is to vote for rates that do in fact protect the middle class and those striving to get there," Pritzker said at a news conference after Monday's vote. "That's what we all believe in, is protecting the middle class. That's what it is to be a Democrat, to stand up for the middle class and those striving to get to the middle class. That's what I ran my campaign on. That's why we won by 16 points because all of us, all of us who stand up for the fair tax believe that it has been too long since we actually fought for the middle class in this state."
Commending Pritzker for his leadership, House Speaker Michael Madigan called Monday's vote "a major step toward a stronger Illinois."
"There is more work to be done, and House Democrats stand ready to continue our efforts to build a stronger middle class and build a stronger Illinois by making income taxes and property taxes fairer for the middle class," Madigan said in a statement.
During a three-hour debate that preceded the vote, Republicans contended the graduated tax plan would make it easier for lawmakers to raise rates and warned that middle-class taxpayers will end up being taxed at rates higher than the current 4.95%. While Democrats said voters should be allowed to weigh in on the issue, GOP lawmakers countered that some voters already had their say by leaving Illinois.
Republican Rep. Margo McDermed of Mokena called the rates proposal awaiting a House vote "teaser rates, fake rates, lying rates."
"If you think that this doesn't hit you, you're wrong," McDermed warned middle-class taxpayers.
Rep. Avery Bourne, a Republican from downstate Raymond, added, "There simply aren't enough rich people in this state to pay for the insatiable appetite of spending that we see here in Springfield."
Democrats argued Pritzker's election over one-term Republican Gov. Bruce Rauner represented a mandate for the governor's campaign initiatives, including a change in the state income tax.
Supporters of the graduated tax said the state's current flat tax could also be changed at any time, and that any increase would be more onerous on lower incomes. They contended Republicans are largely trying to protect the wealthy from significantly higher taxes.
"We put too much of the burden of funding our government on the backs of the people who can least afford to pay it," said Rep. Robert Martwick, a Chicago Democrat who sponsored the proposed amendment.
Illinois has spent much of the past two decades trying to cut its way to a balanced budget, reducing funding for public schools and universities, state parks and child welfare, while its debt and pension payments continued to grow, Martwick said.
"This is reform. This is what we all come here to do: identify problems, find solutions. This is the solution for Illinois going forward," he said.
House GOP leader Jim Durkin of Western Springs laid the blame for the state's many financial problems at the feet of House Democrats, who've controlled the chamber for all but two of the past 36 years.
"Those woes, those troubles, those painful cuts, those were decisions made by the majority party. That's the truth," Durkin said during Monday's debate. "So here's my advice to the House Democrats today: Take responsibility for this mess before you ask more of its citizens."
In an acknowledgement that rising local property taxes are a top concern of voters, Pritzker and supporters vowed that ratification of a new income tax structure would be an initial step toward more comprehensive changes to Illinois' tax system.
They announced their support for a task force to consider long-term changes to alleviate property taxes, the bulk of which provide a primary source for funding for local schools.
They also touted new legislation aimed at creating a property tax relief fund to provide an unspecified rebate on future real estate tax bills, though it was uncertain how much such a program would cost or where the funds would come from.
Some House Democrats had said that property tax relief had to be addressed to secure their votes for the income tax amendment.
"For the first time in my tenure, I know we finally have the momentum needed to provide property tax relief to our communities. Our current system does not work, and we all know that," Democratic Rep. Sam Yingling of Grayslake, one of the holdouts, said during the debate. "The process of property tax restructuring will not be easy, but I submit that that process begins today."
In a precursor to the larger battle of trying to influence voters ahead of the graduated tax amendment vote in November 2020, ads on television and cable have been appearing for months on both sides. Think Big Illinois, which is backed by Pritzker, has aired ads urging public support, while a variety of groups, including Ideas Illinois, which is headed by the former president and CEO of the Illinois Manufacturers' Association, are opposing the plan.
Each side has adopted its own lexicon for the proposal. Pritzker and supporters dub it the "fair tax." Opponents allied with Republican interests have called it the "jobs tax."
"Over the course of the next year-and-a-half Speaker Madigan and Governor Pritzker will spin this tax a million ways calling it 'fair' but not once will they call it what it really is: a blank check for the politicians in Springfield signed by Illinois families," Ideas Illinois Chairman Greg Baise said in a statement.
While the vote to put the amendment on the 2020 ballot is a major win for Pritzker, lawmakers are scrambling to approve other portions of the governor's ambitious agenda -- including legalizing and taxing recreational marijuana and sports betting and creating a large-scale public works construction program -- before Friday's scheduled end of their spring legislative session. The details of those plans are still being negotiated, as is a spending plan for the budget year that begins July 1.
Earlier Monday, Democratic Rep. Bob Rita of Blue Island, who's sponsoring gambling expansion legislation, said he believes lawmakers will be able to reach a consensus on sports betting, new casino licenses and other issues by the end of the week.
Pritzker called on lawmakers to pass a stand-alone sports betting bill this spring to bring in $200 million in licensing revenue to help balance his spending plan for the budget year that begins July 1. But it's now clear that getting enough votes will almost certainly require reaching an agreement on new casino licenses and other issues that lawmakers have been unable to settle since 2013, when then-Gov. Pat Quinn vetoed the last gambling expansion bill approved in the General Assembly. Pritzker recently has said he supports a wider gambling expansion bill.
"The dynamic of having the executive office and the legislature working together to try to get something done is something we haven't had in the past," Rita said.
Republicans, in particular, are pushing hard for new casinos in areas including Rockford and Danville to help generate revenue to pay for building projects at public schools, state universities and other facilities as part of a capital construction plan. Meanwhile, Chicago Mayor Lori Lightfoot sent emissaries to Springfield last week to advocate for a casino license for the city, among other issues.
Democrats want Republican votes to help approve a plan to fix buildings, roads and bridges, but the GOP is balking at a long list of tax increases Pritzker has proposed to pay for it.
"If gaming doesn't pass, capital won't pass," Republican Sen. Dave Syverson of Rockford said last week. "But we really need gaming. Chicago needs it; Chicago deserves it. Communities like Rockford definitely need (casino licenses). So we need this gaming bill passed, not just to be able to fund capital but to be able to fund those communities that are economically struggling."
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