Analyst: Millionaires tax could hurt state competitiveness amid renewed push
(The Center Square) – As a push for a statewide millionaire tax is being renewed in Chicago ahead of state lawmakers’ fall veto session, one policy analyst says the proposal could impact more than just the state’s wealthiest residents.
Earlier this month, more than 80% of voters in the city said they’d support a statewide 3% income tax on individuals who earn more than $1 million a year, which would go toward property tax relief and education funding.
On Friday, six Chicago alderman called for a special council meeting to vote on an ordinance that would urge lawmakers to reconsider the tax during their fall veto session, which begins Tuesday.
Tax Foundation Vice President of State Tax Policy Katherine Loughead told The Center Square the state’s 38th-place ranking nationally based on tax competitiveness could easily be lower if a millionaires tax were to be imposed.
“That would be a pretty big blow to Illinois’s index ranking because the flat tax is the one thing that is really helping Illinois stay above the bottom third of states overall,” Loughead said. “I know that folks in Rhode Island, for instance, are concerned. They recently adopted a millionaires tax similar to what Illinois is proposing and that didn’t take effect in time for this year’s index, but it will definitely affect their rankings next year.”
The state has at least 28,000 tax filers who report more than $1 million annually, or 0.5% of all residents who file in the state, according to the Illinois Economic Policy Institute. The tax would bring an estimated $3.8 billion for the state in its first year.
Despite the amount of revenue it could generate, the tax would require voters across the state to approve an amendment to the state’s constitution – something that wasn’t called for a vote by Illinois House Speaker Emanuel “Chris” Welch earlier this year due to a lack of support within the majority party’s caucus.
Loughead said even if the tax had passed, the proposal would impact more than just the wealthiest Illinoisans.
“The vast majority of Illinois’s businesses do have at least a million dollars in income or at least some income that would be exposed to the proposed new millionaires tax. So it’s important to keep in mind that this isn’t just falling on the wealthy. It’s falling on those who are creating jobs,” Loughead said.
That impact on business owners could be compounded, as more than 88% of Chicago voters said they’d also support higher corporate tax rates while at the ballot box on Nov. 3.
The aldermen called for the special meeting to take place Wednesday at 10 a.m. to hold a vote on the millionaire tax ordinance and one to direct city officials to choose a replacement company to contract for gunshot detection technology deployment citywide, which a majority of voters also supported.
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