Lawsuit takes aim at graduated tax ballot language
Jerry Nowicki/Capitol News Illinois
SPRINGFIELD – A think tank once tied to Republican former Gov. Bruce Rauner is suing the Illinois State Board of Elections and secretary of state, charging that graduated tax constitutional amendment language is “misleading” as it appears on the General Election ballot and in a pamphlet sent to voters.
The Illinois Policy Institute, which describes itself as a libertarian-leaning think tank and has been a leading organization in opposition the amendment, is joined by three retirees in the lawsuit which asks a judge to force election authorities to send “a corrective notice” to voters regarding the graduated tax constitutional amendment.
That amendment – which is a marquee policy initiative of Democratic Gov. JB Pritzker, who has given more than $50 million to groups lobbying for its passage – would change the state’s constitution to allow lawmakers to impose different tax rates on varying levels of income. Currently, the state must level a flat rate income tax on every penny of a taxpayer’s income.
On the ballot, voters are asked to vote “yes” or “no” after reading the following language:
“The proposed amendment grants the State authority to impose higher income tax rates on higher income levels, which is how the federal government and a majority of other states do it. The amendment would remove the portion of the Revenue Article of the Illinois Constitution that is sometimes referred to as the ‘flat tax,’ that requires all taxes on income to be at the same rate. The amendment does not itself change tax rates. It gives the State the ability to impose higher tax rates on those with higher income levels and lower income tax rates on those with middle or lower income levels. You are asked to decide whether the proposed amendment should become a part of the Illinois Constitution.”
The IPI’s lawyers argue in the court document that the amendment would “eliminate important structural safeguards that deter legislators in the General Assembly from imposing new taxes on retirement income and deter legislators from imposing higher taxes on individuals with middle or low incomes.”
Many of the arguments in the lawsuit filed in Cook County Circuit Court mirror those that conservative groups have used to argue against the amendment’s passage in public advertisements, opinion pieces and campaigns.
The basis of the lawsuit is the language of the question and the arguments in favor of the proposal that were distributed to voters.
The phrasing of the ballot question and pamphlet was approved on a partisan roll call in the General Assembly earlier this year. But the lawsuit claims the “misleading statements in the ballot explanation deny voters their rights to a free and equal election in violation of the Free and Equal Elections Clause of the Illinois Constitution,” as well as the 14th Amendment to the U.S. Constitution.
The lawsuit objects to the language that says the amendment allows the state to “impose higher income tax rates on higher income levels,” and suggests it be changed in a corrective notice to be sent to voters to read “different income tax rates on different income levels.” It also seeks an added sentence noting, “The General Assembly would continue to have the authority to establish income tax rates.”
When the language passed, Republicans in the General Assembly issued similar concerns, noting the language in the question was similar to language used in arguments supporting the measure.
The lawsuit also argues that the absence of the actual amendment language in the pamphlet and on the ballot is also a violation of voters’ U.S. and state constitutional rights. The lawsuit seeks to have that information included in the corrective notice they are asking a judge to require.
Specifically, Article 9, Section 3 of the Illinois Constitution would be amended if the ballot question passes. The new language would read: “The General Assembly shall provide by law for the rate or rates of any tax on or measured by income imposed by the State. In any such tax imposed upon corporations the highest rate shall not exceed the highest rate imposed on individuals by more than a ratio of 8 to 5.”
That would replace the current language, which states: “A tax on or measured by income shall be at a non-graduated rate. At any one time there may be no more than one such tax imposed by the State for State purposes on individuals and one such tax so imposed on corporations. In any such tax imposed upon corporations the rate shall not exceed the rate imposed on individuals by more than a ratio of 8 to 5.”
Under current law, lawmakers already have the authority to tax retirement income – it is not an added power granted by the amendment. While lawmakers could tax retirement income currently, it would have to be at the same flat rate of any other income tax levied and it would have to apply to every retirement earner equally.
Because the amendment removes the flat tax requirement, however, it would open the door to taxing some levels of retirement income without taxing every retiree’s income. Opponents argue this makes raising or creating such a tax politically easier.
Gov. JB Pritzker has frequently said he opposes any tax on retirement income, and a rate structure already approved by the General Assembly in separate legislation that will become law in January if voters approve the amendment does not provide for retirement income taxation. That structure would raise taxes on those earning more than $250,000 annually while keeping taxes level or lowering them slightly for those earning less than that amount.
But the lawsuit argues those rates are subject to change and a retirement income tax could be instituted by a future General Assembly.
The number of votes required to raise income taxes in the General Assembly – a simple majority – is unchanged by the amendment.
The lawsuit argues, however, that a pamphlet sent by Secretary of State Jesse White’s office to voters which states “This amendment does not tax retirement income” could be interpreted by voters “to mean that voting in favor of the (graduated tax) amendment is specifically a vote against the imposition of a tax on retirement income,” when it in fact is not.
The lawsuit cites a June comment from Illinois Treasurer Michael Frerichs, a Democrat who has no role in setting tax rates, as an indicator that retirement taxes are being considered by state lawmakers.
“Specifically, the Illinois State Treasurer, Michael Frerichs is reported as stating at a Chamber of Commerce event that ‘[o]ne thing a progressive tax would do is make clear you can have graduated rates when you are taxing retirement income, and, I think that’s something that’s worth discussion’ or words to that effect,” according to the lawsuit.
Frerichs had scheduled a news conference for Tuesday morning to “condemn misleading statements” about taxing retirement income, but he canceled it about 10 minutes before the event. Instead, he issued a statement in favor of a graduated tax and said, “I oppose creating a retirement tax in Illinois, along with the General Assembly, and governor.”
John Tillman, who is the chairman and CEO of Illinois Policy Institute, is not a stranger to suing the state. In August, a Sangamon County judge declined to hear a lawsuit filed by Tillman as a private citizen challenging the constitutionality of two of the state’s general obligation bond issuances.
Former Gov. Rauner’s family foundation had given at least $500,000 to IPI before he was governor, according to the Chicago Tribune, and several staffers went from IPI to serve briefly on Rauner’s staff in high level positions in 2017 before the ex-governor vowed not to give any more money to the organization.