Illinois Tax Increases and the Impacts on Citizens

Illinois Tax Increases and the Impacts on Citizens

The tax-and-spend concept to governance didn’t come out of the blues—Gov. Pritzker orchestrated it, and Illinois citizens might have to live by it.

It was part of his gubernatorial campaign. The idea is to implement a progressive tax system in Prairie State specific to fix the $3.2 billion deficit. Now he wants the state legislature to join his bandwagon of “Fair Tax” plan.

It will all be gone—the state’s 4.95% flat tax. Then a 6-bracket progressive tax system would be in place using a constitutional amendment. For income over $1 million, expect a 7.95% top marginal tax rate.

The Governor proposed 97% of taxpayers would get tax relief. Sadly, that may not be the case.

According to him, the country tax system is not a cast in stone—it changes all the time. So citizens should not expect any guarantees, going by his assertions. But there may be hope at the end of it all because Gov. Pritzker is fighting for it.

But there is a twist—the top rate has been hijacked to 7.99%, and set at $750,000, not $1 million. Even the Democrat-controlled House of Representatives voted on Memorial Day supposedly along party lines for the constitutional amendment.

60% of voters must then agree to this measure for it to become law.

Let’s take a look at the pension liability:

The pension liability in Illinois is largely unfunded—amounting to $134 billion. The state budget caters to 25% pension-related expenditures. If the truth is told, there is an urgent need for reforms in this area. But the Gov. Pritzker’s easy way out were higher taxes, which will result in more debts.

To cushion this effect, he has injected $2 billion in bonds directly into the retirement system.

Well, you might call it a smart move. But let me shock you—Illinois has the lowest credit rating anywhere in the US.

The state will descend further into debt because the state’s low credit rating will allow bonds to be offered to buyers at a high rate.

Would it be appropriate to say Illinois lawmakers have fallen short of their obligations? Have they have failed in protecting their constituents, especially in the area of massive tax increases?

But the ballot will decide the measure, with voters having to protect themselves.
If the voter decides to ratify the measure, the first-term Governor promised the graduated tax income would provide relief to many taxpayers.

However, critics have their reservations—higher taxes and fees will melt untold hardship to the people of Illinois.

Pritzker believed that his government has done all they could to relieve the burden across the state and that they’ll look for options to make life easier for citizens.

According to him, people need good roads to drive on—and should be safe while at it. He said there is a $15 billion of life-safety issues of infrastructure to be taken care of, and they’re doing the best they can.

The constitution amendment of Illinois was approved in 2016—by voters. It is touted as a “lockbox” amendment, where only transportation-related revenue goes into transportation projects alone—and some other related costs.

Let give you a clearer perspective as regards the tax and fee increases:

Gas Tax Increase

From July 1, the 19-cent-per gallon fuel tax will double in line with the plan. It was raised in 1990, which would index for further inflation increases. There could be a separate levy of the 3-cent-per-gallon motor fuel tax for municipalities in Cook County.

Motorists Fees

License plate fee goes up from $50 to $151 on an annual basis—this takes effect from 2020 registration year. More so, the charges for an electric vehicle go up to from $35 to $248 per year—and to start by Jan 1. All of these lend support to transportation-related projects.

Smoking and Vaping

There is an increase of $1 on the state’s $1.98-per-pack cigarette. For e-cigarette, it will attract a tax rate of $15. The increases are to take effect by July.

Parking Tax

Garage and lot parking will attract a 6% daily and 9% monthly taxes from Jan 1. This is meant to provide funds for building construction projects.

Online Sales Tax

The bill will allow for the expansion of sales tax collected via online purchases to that made using out-of-state online retailers.

The capital plan also talks into account the state revenue that comes from gambling and sport betting. This is for the funding of building construction components, including projects at universities and colleges.

The entire tax increases are deemed suspicious, and would you blame Illinoisans for that? Well, no. Take, for example, the double tax hike and other fees in a way, took away the “relief” that middle-class families would enjoy.

Illinoisans have barely condoned high taxes for years. Meaningful reforms would have been the best option rather than seeking out new ways to tax residents. Such reforms will encourage a more inviting tax climate.

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