The neediest Illinoisans would be better off paying a 5 percent income tax than they are now, paying 3.75 percent, a new study suggests. The 2011 income tax increase rolled back on schedule Jan. 1. Most expect spending cuts immediately in Illinois, and there’s less money coming in. It takes a constitutional amendment to change to a graduated tax – but the Center for Tax and Budget Accountability’s Ralph Martire says Illinois does not necessarily need one anyway.
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“You could design credits through the income tax system that target tax relief solely to these low- and moderate-income families – doesn’t provide the tax relief to the top -- and that’s a winner,” Martire argues, “because these low- to moderate-income families have that higher marginal larger propensity to consume and are likely to spend the tax relief that they receive.”
“I do think everything we do in terms of looking at revenue should be through the lens of making it a fairer revenue structure,” says State Sen. Heather Steans (D-Chicago), agreeing. “Wealthier folks in this state pay a much lower share of their income in taxes than average in the United States, whereas our low-income folks pay a much higher share of their income in taxes than the average in the United States.”
The governor's budget message – which could include significant and immediate cuts – is Wednesday.