The Illinois fair tax referendum is coming up at the November election.
The Illinois Secretary of State had recently mailed out a pamphlet on this proposed amendment to the Illinois Constitution. In this pamphlet it provides arguments for and against the proposed amendment. It however does not discuss the new rates that would be imposed for individuals and corporations.
Why is there a referendum? Proposed rate changes
The constitutional amendment would remove the requirement that income be taxed at a flat rate and allow for a graduated tax rate structure. The state government would then be allowed to change income tax rates through the normal legislative process. The Illinois legislature proposed a new set of income tax rates in Senate Bill 687. This legislation would take effect on January 1, 2021 if voters approve the constitutional amendment in November 2020.
Personal income tax
The table below shows the new tax rates on personal income proposed in Senate Bill 687. Those with a taxable income of $250,000 or below would retain the same marginal tax rate or see their rate lowered. Rates would increase for those making over $250,000, with the specific rate varying depending on whether a taxpayer is filing alone or jointly.
Single filers with a taxable income over $750,000 and joint filers with a taxable income over $1 million would pay the maximum rate of 7.99% on their entire taxable income, rather than paying marginal tax rates for each tier of income.
Proposed Changes to Personal Income Tax Rates in SB 687
Taxable Income(for single filers) |
Marginal Tax Rate in 2019 |
Proposed Marginal Tax Rate(for single filers) |
Proposed Marginal Tax Rate(for joint filers) |
| $0 – $10,000 | 4.95% | 4.75% | 4.75% |
| $10,001 – $100,000 | 4.90% | 4.90% | |
| $100,001 – $250,000 | 4.95% | 4.95% | |
| $250,001 – $350,000 | 7.75% | 7.75% | |
| $350,001 – $500,000 | 7.85% | ||
| $500,001 – $750,000 | 7.85% | ||
| $750,001 – $1,000,000 | 7.99% on net income | ||
| $1,000,001 and above | 7.99% on net income |
How do I figure out how much I might pay under a graduated income tax?
Use the state’s calculator to see how much your income taxes might change.
Other Personal Income Tax Changes
- Increase in the property tax credit from 5 percent to 6 percent ($250K/$500K limitation still applies)
- Creates a per-child tax credit of up to $100 for couples earning less than $100,000 (phase out $60-100K) and single persons earning less than $80,000 (phase out $40-$80K).
Important Note: The amendment would not allow for the taxation of retirement income. (No change from current law.)
Corporate tax
The proposed constitutional amendment includes a requirement that corporate income tax rates must not exceed the highest income tax rate by a ratio of 8 to 5. The new tax rates proposed by the state legislature in SB 687 includes an increase in corporate income taxes from 7% to 7.99%.
Replacement tax of 1.5% for pass through entities and 2.5% for corporations remain unchanged.
Please reach out to your Porte Brown advisor for any questions regarding this proposed amendment and how this may affect you.
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