Governor JB Pritzker and his allies in the Senate introduced a graduated income tax structure (Amendment #1 to SB 687). The rates, filed for the first time since the Governor discussed them nearly two months ago, are higher than previously discussed and will reportedly generate more than $3.4 billion in new revenue.

This Democrat tax plan will now include thousands of more Illinoisans and businesses because it significantly reduced the top bracket by 25 percent so more Illinois families and businesses will be taxed at the top rate.

If enacted, Illinois will have the 3rd highest corporate tax rate (10.49 percent**) in the United States, trailing only Iowa (12 percent) and New Jersey (11.5 percent). However, Iowa’s top rate is scheduled to drop to 9.8 percent in 2021** tax rate plus CPPRT

With the Constitutional amendment language allowing an 8:5 ratio between the corporate and individual rates, the General Assembly could make corporations pay a whopping rate of 15.2 percent.

Under the Pritzker tax hike, corporate tax rates will be 10.49 percent (7.99 percent plus the 2.5 percent corporate personal property replacement tax) while many small businesses will pay a rate of 9.49 percent (7.99 percent plus 1.5 percent corporate personal property replacement tax). Illinois’ top individual tax rate would be the 8th highest nationally.

More than 75 percent of Illinois businesses file taxes under the individual income tax rate such as Subchapter S corporations, partnerships, and LLCs. The Governor’s proposed rates are as follows:

Single Filers: Income Tax Rate
$0 – $10,000 4.75 percent
$10,001 – $100,000 4.90 percent
$100,001 – $250,000 4.95 percent
$250,001 – $350,000 7.75 percent
$350,001 – $750,000 7.85 percent
$751,000 or more 7.99 percent*
Joint Filers: Income Tax Rate
$0 – $10,000 4.75 percent
$10,001 – $100,000 4.90 percent
$100,001 – $250,000 4.95 percent
$250,001 – $500,000 7.75 percent
$500,001 – $1,000,000 7.85 percent
$1,000,000 or more 7.99 percent*

*Once income for single filers reaches $750,000 million, or $1 million for joint filers, the entire income is taxed at the 7.99 percent. Employers with income at this level will see the entire amount taxed at the maximum rate plus the CPPRT.

In an attempt to address the skyrocketing cost of property taxes, the Governor is proposing to increase the current property tax credit from 5 percent to 6 percent. However, this credit is only available to taxpayers with incomes of $500,000 or less (married filing jointly) or $250,000 (single). In total, the Governor is offering only $100 million in property tax relief in exchange for $3.4 billion in higher income taxes. Many Illinois businesses will not see a single penny of property tax relief.

Additionally, the Governor is proposing to add a new $100 per child tax credit that will only be available for filers with income less than $100,000 (joint) or $80,000 (single). The small credit starts phasing out at $60,000 (joint filer) and $40,000 (single filer) respectively by $5 for every $2,000 in income.

One additional amendment has also been filed to a bill on the legislative calendar.  Amendment #1 to SB 689eliminates the estate tax on January 1, 2021, and is supported by the IMA.

The IMA is leading the fight against the new “blank check” tax on Illinois businesses and families. Click here to get more information or make a contribution.