Governor J.B. Pritzker has proposed a new progressive income tax plan to change the way the state taxes its citizens. This proposal will be on the November 2020 general election ballot. However, in keeping with Illinois’ political traditions, improper planning was utilized with this new tax proposal. It seems that many factors were overlooked when this tax amendment was stitched together, and unrealistic revenue earnings were predicted for the upcoming fiscal year.
The large gap between the expected revenue from Pritzker’s new tax rates and the actual revenue would not come anywhere close to securing the budget deficit. In turn, a higher income tax for the middle-class Illinoisans could very well be the way that deficit is funded. On top of the lack of planning by the state government, election years historically see a hindered economic growth nationally.
Nationwide, the uncertainty associated with the winner of the election comes with slower economic spending overall. Businesses and individuals alike tend to be conservative and typically start to build a rainy-day fund in preparation for the worst, as a number of policies will not be determined until next November. As a result of the lesser spending, interest rates decline for the time being and the economic growth is often stunted.
Looking at our state individually, a state that is known for overspending and under-budgeting, this economic uncertainty and new progressive tax budget could have detrimental effects on Illinoisans. Pritzker’s new progressive rate takes into consideration our current economic state and not that of the more likely stunted economy in the next year.
The income tax revenues from the wealthier population of Illinois will likely fall short of the Governor’s lofty projections, increasing the deficit. To bridge this gap, the missing revenue will need to be sourced from other populations, inadvertently raising the tax rates for middle-class citizens. Furthermore, small businesses can expect to feel some damage from this higher tax rate. In fact, the progressive tax rate could reach to one of the highest in the country as a result of economic uncertainty and slowed growth.
Illinois has experienced an 18-year-long trend of spending more than it generates, partially as a result of unbalanced budgets and poor financial planning by our government. While Pritzker’s intentions behind the change from a flat tax rate to a progressive tax rate might be pure, his planning and mathematical calculations fell short – and policy experts are not surprised. This unrealistic budget, on top of the already exuberant pension debt that Illinois carries, is enough cause for concern.
Small businesses and middle-class workers are the vital organs of the state of Illinois. Poor planning and proposing changes that negatively impact these lifelines are sure to harm our already stumbling economy.