Fair Tax Proposal
In 2019, the Illinois General Assembly passed legislation to place a graduated income tax referendum, formally titled the “All for Graduated Income Tax Amendment,” on the ballot for the November 2020 election. Known as the Illinois Fair Tax proposal, it would require a constitutional amendment to change the state income tax system from a flat tax to a graduated income tax.
What’s the Issue?
- The state of Illinois is widely recognized to have a structural revenue deficit, meaning that its tax structure is not adequate to cover its spending on public services.
- According to the Illinois Comptroller’s Office, Illinois has run a deficit in its General Fund every year since at least 1986. The primary driver of these recurring General Fund deficits is the state’s poorly designed tax policy.
- After adjusting for inflation, total General Fund revenue is slightly less in real term dollars today than it was 20 years ago in FY2000.
- Even before the COVID-19 pandemic, Illinois was projected to have a general fund deficit of $8.4 billion. The pandemic is expected to further reduce Illinois revenue by an estimated $4.5 billion.
- Under a graduated income tax, people with lower incomes pay a lower tax rate than those with higher incomes.
- The majority of states and the federal government have graduated income tax structures.
Why does it Matter?
- Currently, $9 out of every $10 of General Fund spending goes to four core areas: Education, Healthcare, Human Services, and Public Safety.
- General Revenue spending on these services are scheduled to be 20% – or $7.26 billion – less in real terms than they were in FY2000.
- These structural deficits will become worse over the next few years as the economic impact of COVID-19 drives revenue further down.
- The structural deficit cannot be eliminated without raising taxes but raising taxes in an underperforming tax structure isn’t enough. Tax reform is also needed.
- Under the Illinois Fair Tax 97% of Illinois households are expected to pay lower taxes, while Illinoisans making more than $250,000 per year will pay higher taxes.
- If approved, the graduated tax structure would simultaneously:
- Update Illinois’ state-level tax policy to respond better to the modern economy
- Improve Illinois’ fiscal condition by raising approximately $3.4 billion in new, recurring revenue annually
- Distribute the tax burden on taxpayers more fairly
What’s AMITA Health’s perspective?
- AMITA Health joins the Illinois hospitals community in supporting the Fair Tax referendum.
- It is clear that tax reform is needed to stabilize Illinois’ finances. In the absence of new state revenues, funding for healthcare and other critical services will be at risk.
- The referendum will make the Illinois tax code fairer, provide tax relief to the vast majority of Illinoisans, and ensure that the state has adequate revenue to meet its financial obligations.