Budgeting can be tough. Whether you are a recent graduate out on your own for the first time or a person who has been in the workforce for years, coming up with a budget and sticking to it isn’t always the easiest thing. If you don’t believe me, just ask Illinois -- a state that has been working to finalize its budget for almost a year.
Illinois’s individual income tax is seen by some as the antidote to what ails the state’s budget, reports the Herald & Review. A recently proposed constitutional amendment (H.J.R.C.A 59), and accompanying legislation (H.B. 689), aimed to turn Illinois’s flat tax rate of 3.75 percent into a graduated rate, the article states.
Unlike a flat tax which taxes all income at one rate, a graduated tax system taxes income at differing rates depending on how much an individual earns. This means that theoretically an individual who makes $1 million a year will be taxed at a higher rate than an individual making $10,000.
Only about 1/5 of the states that impose an individual income tax use a flat rate, with the vast majority instead electing to tax individuals on a graduated scale, the article noted. Supporters of this proposed change to Illinois’s taxing system argue it would have led to quite the increase in annual revenue, according to the article.
Illinois is not alone in looking at individual income taxes as a way to deal with money issues. Recently Alaska Governor Bill Walker, facing a budget deficit, has proposed to institute an individual income tax for the first time in decades. Alas, where Alaska’s income tax debate is still ongoing, albeit barely, it appears as though Illinois’s has ended.
Having not been able to garner the necessary votes by May 4 to put H.J.R.C.A 59 on the next election ballot, the proposed amendment and legislation have fallen by the wayside, as reported by Michael J. Bologna in Bloomberg BNA’s Weekly State Tax Report. Questions regarding the state’s competitiveness for businesses may have played a factor in the amendments failure to make it out of the legislature, the article stated.
As Illinois sticks with its flat tax, the state will need to continue looking for other possible solutions to resolve their budget.
*Continue the discussion on Bloomberg BNA's State Tax Group on LinkedIn: Should Illinois adopt a graduated tax system?
For more information about tax credits, check out Bloomberg BNA’s Individual Income Tax Navigator by signing up for a free trial of the Bloomberg BNA Premier State Tax Library today.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)