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Graduated system pushed on eve of budget address

Published: Wednesday, March 26, 2014 1:15 a.m. CST
Caption
(AP)
Illinois Sen. Don Harmon, D-Oak Park, speaks to reporters during a news conference Tuesday at the Illinois State Capitol in Springfield. On the eve of Illinois Gov. Pat Quinn’s budget address, Harmon announces rates that would be involved in a graduated income tax proposal.

SPRINGFIELD (AP) – An Illinois senator announced a push Tuesday for a major overhaul of the state’s income tax structure, calling for a move to a graduated system that would require more from the wealthy.

The legislation and ballot measure being proposed by Democratic state Sen. Don Harmon were announced on the eve Gov. Pat Quinn’s budget address and on the heels of House Speaker Michael Madigan’s introduction of a constitutional amendment to tax millionaires.

The proposal faces an uphill climb, particularly in the Illinois House, where Democrats remain short of the votes needed to get the measure on the ballot. But Harmon on Tuesday described his plan as way to cope with the loss of an estimated $1.6 billion when a temporary increase is rolled back as he highlighted the gridlock between Democratic and Republican lawmakers in addressing the issue.

“There is not a good choice there. This is a third way,” Harmon, an Oak Park Democrat, said.

Harmon’s plan would tax the first $12,500 of a resident’s income at 2.9 percent. Income between $12,500 and $180,000 would be taxed at 4.9 percent. Income earned above $180,000 would be taxed at 6.9 percent.

The legislation, which Harmon said he plans to file in the coming days, would work in tandem with the resolution he introduced earlier to place a measure on the ballot asking voters to amend the state constitution, which currently mandates a flat income tax against all income levels. To do so, both chambers of the Legislature would have to approve the resolution by a three-fifths vote by early May.

The graduated tax system is used by the federal government and 34 of 41 other states that charge an income tax.

The new rates, Harmon said, would equate to a tax cut for 94 percent of Illinois residents, if the current rates stay in place.

But Republicans say it’s a tax increase in disguise, and as they accuse Democrats of going back on their word that the 2011 income tax hike would be temporary.

The rate for individuals is scheduled to drop from 5 percent to 3.75 percent in January.

“This spring session has been the competition of Democrats’ tax hike proposals,” said Republican state Sen. Matt Murphy of Palatine.

Harmon said that he views the graduated income tax as “compatible” with Madigan’s proposal. The speaker’s amendment would tack a 3 percent surcharge onto incomes over $1 million, which Madigan said would raise $1 billion a year for elementary and secondary education.

The proposals working in tandem, University of Illinois Springfield Professor Charlie Wheeler said, is possible, as Harmon’s question only deals with income above $180,000 and Madigan’s with income in excess of $1 million.

“They could work together,” Wheeler said, “if the language was made compatible before they were on the ballot.”

Harmon’s proposal has already encountered resistance from a number of conservative groups, including Americans for Prosperity, which last week launched a television ad attacking the proposal.

Harmon said he plans to introduce a “significant education campaign” in the months ahead about the tax.

“We need voters to understand they are voting for their own pocketbooks,” he said.

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Follow Kerry Lester on Twitter at http://twitter.com/kerrylester

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