IRMA Explains Opposition To Graduated Income Tax Amendment

By Benjamin Cox on October 15, 2020 at 6:06pm

The Illinois Retail Merchants Association says that the Graduated Income Tax Amendment is bad for business in Illinois. IRMA has twice approved income tax raises in the state in the past with the belief that it would help get the state out of debt.

This time, IRMA President Rob Karr says there is no confidence that the new tax amendment would help fill the gap in the state’s budget or fix any problems: “We have been the only business group that has twice before supported increases in the income tax. Once under Governor Edgar. Once under then-Governor Quinn. Both times, those were to solve issues, to solve problems. Neither time has that really worked out. While there was a surplus when Governor Edgar left office of about $1 billion, and I guess you could argue that it worked out over time, it just did not. It certainly did not under Governor Quinn. We have the twice burned effect here has kicked in. There is no level of confidence that this state is going to utilize the revenues that might be realized from this increase to solve problems. In fact, there are people lining up for additional spending is starting to run around the Capitol.”

Karr says the proposed rates by the proponents of the amendment aren’t going to fix Illinois’ budget issues: “Those rates were already somewhere in the neighborhood of $2 billion short of what was necessary, so those rates were already wanting and that was during the pre-pandemic economy which was at historic strength. Now, those rates have got to be 5, 6, or 7 billion dollars short. To argue that this is going to solve a problem, which proponents are doing, is simply not true and it underscores our point that it doesn’t solve the problem. There’s no confidence that this is really going to what they are claiming it is going to do.”

Karr says that the graduated income tax proposal only dedicates about 10% of its revenues toward the Illinois pension backlog estimated to be about $200 billion. Karr also believes that it creates a false dichotomy of rich and poor in the state’s income tax brackets, allowing the graduated tax to shift higher or lower depending upon the supposed need of the state. Karr also believes the state does a poor job of defining small business and corporations when it comes to taxes, again painting a false dichotomy of a “big corporation” with businesses that have more than 50 people versus many small family-owned businesses that actually employ more than 50 people but have small revenues.

Karr says the board found it difficult to support a new tax given the state’s historically poor financial management without imposing any additional checks and balances into the language of the amendment, or any partner legislation that would curb the state’s spending problems.