On November 3rd, Illinois voters will have a choice to vote for or against the proposed graduated income tax plan. This amendment would replace our current flat tax of 4.95%.
This plan would work similarly to our Federal Income System where higher incomes are taxed at higher rates. This plan is now being marketed and pushed by a $56M advertising campaign. The proposed income tax rates are as follows…
Single
| Income | Rate |
|---|---|
| $0 – $10,000 | 4.75% |
| $10,001 – $100,000 | 4.9% |
| $100,001 – $250,000 | 4.95% |
| $250,001 – $350,000 | 7.75% |
| $350,001 – $750,001 | 7.85% | Greater than $750,001 | 7.99% |
Married Filing Joint
| Income | Rate |
|---|---|
| $0 – $10,000 | 4.75% |
| $10,001 – $100,000 | 4.9% |
| $100,001 – $250,000 | 4.95% |
| $250,001 – $500,000 | 7.75% |
| $500,001 – $1,000,000 | 7.85% | Greater than $1,000,000 | 7.99% |
This also increases the income tax rate on C-Corps from 7% to 7.99%.
Further, the bill includes an increase in the property tax credit from 5% to 6% and an additional child tax credit of up to $100 per child on lower income families.
The majority of small businesses in the state are taxed as S-Corps, Partnerships, or Sole Proprietors. Since that income passes through to your personal income tax return, this can mean as much as a 47% increase on your taxes. Let’s also remember that S-Corp’s and Partnerships already pay a tax at the entity level of 1.5%. There is nothing in the bill about abating or reducing this additional tax.
I know what many of you may be thinking. You might be looking at the numbers and saying that this will not affect you. I don’t care what your political leanings happen to be. If you are a Democrat, Republican, or Independent in this case is irrelevant. Whether you believe in smaller or larger government doesn’t matter. Either way, I’m sure that there is one thing that we can all agree on.
It’s the fact that no matter how much you give a politician, they always want more.
This is how it starts. If the flat tax amendment is nullified, then Illinois will be able to increase your taxes at will. Soon it will be a middle class tax, and so on. Wisconsin residents pay a 6.27% income tax on incomes between $23,520 and $258,950. Above that income, their tax rate is 7.65%. One of the few reasons to live in our state is the fact that our income tax rates are on the lower side. It gets even better when you retire.
If this “Fair Tax” is put in place, it will give even more people a reason to leave Illinois. And this time, we’re not talking about welfare recipients. This time we’re talking about the very people that own businesses, provide jobs, and keep our state afloat.
There’s something else that I think everyone, no matter what their political leanings, can agree on. It’s the fact that this couldn’t happen at a worse time. Given the effects of the pandemic, unemployment, and businesses closing left and right, it’s just the wrong time for this sort of change.
What else are we supposed to stomach at this point?
Let me leave you with this one thought…
If you think that I am kidding about this just being a start, then please take a look at the history of our most common taxes.
The Social Security Act of 1935 levied a tax of 1% each on employees and employers for the first time. In four graduated steps, it became 3% each by 1949. The President also promised the following…
– That participation in the program would be voluntary
– That the annuity payments to retirees would never be taxed
Social Security Tax Rates are now 6.2% on both employees and employers. Participation is involuntary and proceeds are taxed.
Congress enacted the first Federal Income Tax in 1913. The rate was 1% on incomes above $3,000 going up to 6% on incomes in excess of $500,000.
Five short years later, by 1918, the highest federal income tax rate became 77% on incomes above $1,000,000 in order to finance World War I.
Illinois first instituted income taxes in 1969. Our rate has remained the same, 4.95% since its inception, regardless of income. Our current Constitution mandates it as such. Lawmakers have been unable to change it because our Constitution does not allow any changes. If this amendment passes in November the new income tax system will take effect January 1, 2021.
Please vote your conscience in November.
Accounting Solutions Ltd. stands ready to complete our mission and purpose of protecting you, your family, and your business. If there is anything that you need, whether you are a current client or not, please don’t hesitate to contact us. I’m here and I remain,
Sincerely yours,
Chris Amundson
President
Accounting Solutions Ltd.
773-267-7500
www.AccountingSolutionsLtd.com
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