Illinois Governor Tries To Eliminate Flat Income Tax

My state of Illinois is currently experiencing a fiscal crisis, and our new governor, Pat Quinn, wants to raise income taxes(Of course, a lot of people - including myself - would rather see him cut waste and expenses first).

His ideal scenario would be to replace our flat state income tax with a progressive tax (a tax with multiple rates - like the Federal income tax) so that he can shift more of the increase towards the "rich".

The problem is that a progressive income tax is not permitted by the Illinois constitution.

To get around this, he is trying to create a "de facto progressive" tax by increasing the rate 50% (from 3% to 4.5%), while tripling the exemption.

Currently, out of the seven states with flat state income taxes, Illinois has the lowest rate at 3%. A 4.5% rate would put us in the middle.

The IL flat income tax means that everyone, no matter what their income level, has to pay 3% of their income in taxes. There are no deductions - only a $2000 exemption per person. So, a family of four (husband, wife, 2 children) would have an $8,000 total exemption.

This makes filling out the return easy: just copy the adjusted gross income (AGI) amount from your Federal return, apply the exemption, and then multiply by 3%.

Now, it will still be just as easy to fill out the return (because its still a flat tax), but a family of four would now have a $24,000 exemption, and would be taxed 4.5% on anything over that.

If the family of four makes $50,000, they would pay $1260 under the current rate. Under the new rate/exemption, they would pay $1170 (about 7% less).

But, if the same family of four makes $100,000, their taxes would go up 24% (from $2760 to $3420).