Tax Reform & Modernization

We need serious and comprehensive tax reform in order to fully fund education, healthcare, the pension system, social services, public transportation, and to start putting Illinois back to work.

We cannot balance our budget through gambling proposals or continual raids of the pension system. The only way to ensure long-term, stable funding for our budgetary priorities is with a responsible and equitable reform of our tax system. While our current state constitution prohibits a progressive graduated income tax, legislation similar to HB174 can approximate this system by equitably distributing the burden of a tax increase while providing sustainable funding for our current and future priorities.

In effect, we can implement a graduated income tax structure by raising personal and corporate income taxes by 2% while tripling the Earned-Income Tax Credit (EITC) and doubling the residential property tax credit. Increasing the tax credits will entirely offset the increase for wage earners making $50,000 or less (approximately 60% of workers in Illinois).

At the same time, we can reform and modernize our ineffective and outdated sales tax structure so that our tax revenue grows with our economy rather than dropping annually. The solution is to begin taxing segments of our massive service economy. The average state in the U.S. taxes 55 of 168 services. In Illinois, where services account for 77% of our states economic activity, we currently only tax 17 services (12 of which are utilities). The base of our economy has shifted from goods to services and our taxation system needs to follow suit or continue to suffer from drastic shortfalls.

HB174 would generate upwards of $6 billion in recurring tax revenue. A full third of this money would be dedicated to the Common School Fund to bring Illinois closer to meeting the 50% Constitutional funding mandate. By doubling the residential property tax credit, we will help break the unjust tie between local property taxes and a child’s education that currently impairs schools located in impoverished districts. The current bill raises the personal income tax from 3% to 5% while only increasing the corporate income tax by 0.2% expands the sales tax to an additional 12 services. I would support matching the personal and corporate income tax increases at 2% and exploring a greater expansion of the sales tax to additional services that are currently taxed in adjacent states.

These proposed changes will generate further revenue to help meet our pension obligations and to invest in transportation and energy initiatives that will create quality permanent jobs across our state.