At the rate Illinois is losing people, it wouldn’t take long at all for Pritzker’s progressive tax hike to bleed away Illinois’ million-plus earners. There just aren’t that many of them to begin with. And faced with a 60-percent tax increase, the chances are higher they’ll leave.
Ordinary Illinoisans should worry about the consequences. As more wealthy filers move – yes, the rich are fleeing Illinois and they’re taking billions with them – the middle-income residents who remain will be forced to pay higher taxes to pick up the slack.
Illinois had just 20,000 tax filers with net incomes of more than $1 million in 2016. And of that group, only 775 filers made $10 million or more.
In total, millionaires made up just a tiny 0.3 percent of Illinois’ 6.25 million tax filers.
By comparison, 143,000 Illinois tax filers left for other states in 2018. Adding just a fraction of Illinois’ millionaires to that outbound list every year wouldn’t impact out-migration numbers much, but it sure would impact the state’s revenues. About 16 percent of the state’s income taxes come from $1 million-plus filers.
Maybe the wealthy would stick around for a while under the tax. Or maybe they’d start moving some of their income elsewhere. But they’re more likely to leave if they have a big target on their back. It’s hard to imagine that in the most global and mobile age ever, they’d stick around to pay Illinois’ ever-growing pension debts.
And it’s not just the fact that we’d lose our largest taxpayers to other states. It’s that we’d also fail to attract new, wealthy residents. How many rich outsiders will want to come into Illinois if they’re the targets? Especially when they learn that Illinois politicians, including Gov. Pritzker, have categorically rejected a pension amendment that might slow and reverse the speed of future tax hikes.
That’s not idle speculation on our part. No less than Warren Buffett basically told businesses and the wealthy to stay the heck out of Illinois.
Clearly referring to states like ours, he said:
“If I were relocating into some state that had a huge unfunded pension plan I’m walking into liabilities…
I’ll be here for the life of the pension plan and they will come after corporations, they’ll come after individuals.”
Looking at Pritzker’s “millionaire” filers
Even though Pritzker and supporters of a progressive tax structure said that they’d go after “millionaires,” their tax plan actually hits everyone making $250,000 or more.
What’s important to know about the progressive tax proposal is that (1) currently, there are no tax hikes proposed for anyone making net incomes of $250,000 and below, and that (2) those with net incomes of $750,000 or more would be hit with a massive 60 percent income tax hike.
The tax data on the wealthy comes from a 2019 FOIA request to the Illinois Department of Revenue that provided Wirepoints with final income tax data for 2016. A FOIA was necessary because publicly available IDOR data doesn’t break out millionaire information. We FOIA’d for more recent data, but we were rejected on claims that the data was not yet available.
So, what are the key facts for those targeted by the tax hike?
– There were 6.2 million tax filers in Illinois in 2016 and the net personal income taxes collected totalled $12.6 billion. Illinois had a flat tax rate of 3.75 percent in 2016.
– Those who made between $250,000 and $1 million in net income made up 3 percent of all tax filers, but they paid 18 percent of the total personal income taxes paid in 2016.
– There were just 19,000 tax filers, or 0.3 percent of all filers, who made a net income of $1 million to $10 million. They paid 11 percent of the state’s entire income taxes.
– And If you look at those who made $10 million and above, there were only 775 such filers in Illinois. They paid 5 percent of the state’s entire income tax.
– Cumulatively, those who made $250,000 and above made up just 3 percent of Illinois tax filers, but paid 34 percent of all personal income taxes.
The bottom line is this: It won’t take much to damage Illinois’ tax base beyond what’s already being done. But things can get far worse, especially if the state targets Illinois’ “millionaires.”
And that will leave ordinary Illinoisans stuck with the bill.