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State Rep. Lou Lang Explains How A Graduated State Income Tax is a Tax Cut

State Rep. Lou Lang (D-Skokie) visited with Dan & Amy this morning to defend his proposal to move Illinois from a flat state income tax to a graduated one contending that “99.3%” of Illinois families would receive a tax cut under his proposal.

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Dan Proft: Good morning, Dan and Amy; and money, that’s what they want; in Springfield they want more of it. State Representative Lou Lang has proposed a graduated state income tax, and this is not the first time this issue has been raised, but it’s being reraised, and it would graduate the state’s income tax from rights as low as 3.75%. Amy Jacobson: That doesn’t sound bad. Dan Proft: I’m sorry, as low as 3.5% to as high as 9.75%, for one percenters like Amy Jacobson. Amy Jacobson: Yeah, right. Dan Proft: And is this is a good time to impose more aggressive income taxes on people who are otherwise looking for the exit signs in Illinois? Well, let’s put that question to the sponsor of this legislation. He is State Representative Lou Lang, a Democrat from Skokie. Representative Lang, thanks for joining us, appreciate it. Lou Lang: Good morning, happy to be with you. Dan Proft: So, on this graduated state income tax, you suggest that 99.3% of Illinois tax payers will see a tax cut under your proposal. How’s that? Lou Lang: Well, currently the state income taxes are flat taxes of 3.75%. If you drop the lower level to 3.5, it turns out that if you’re married with a family, you’d have to make more than $764,000 a year net to have to pay more tax under this plan. So everybody under $764,000 that’s married or slightly over $500,000 as single, will be receiving at least some tax cut under this plan. Dan Proft: Back in 2011, before the temporary - that’s how it was sold – temporary increase in the income tax, the income tax was a flat 3% across the board, including for families making less than $750,000 a year, so I thought, are we keeping the promise? It was a temporary tax increase, and now you’re saying that 3.5%, rather than the 3% it was prior to the 2011 tax increase, that constitutes a cut. That actually is an increase that you’re codifying. Lou Lang: Well, it’s certainly an increase from back when our tax was 3% flat, but let’s understand that we call this the fair tax. Under the federal tax code, people who make more money pay a higher percentage of their income. It turns out that in Illinois today, people who make less money are actually paying a much higher percentage based on take-home pay of their income in taxes. And so the goal here was to do two things; first, to create a tax cut for many, many millions of Illinoisans who believed in it and are actually looking for some tax relief; as you said, 99% of Illinoisans under this plan will pay less taxes. There was also an idea that we would raise a little money, and yes, this bill does that, but I want to hasten the ad that many who are looking for more money wanted to file a tax plan that raised as much as 9 billion dollars, which would have provided no tax relief at all; this plan is very measured, it’s very well thought out in my opinion; I’m not just petting myself on the back; I’ve worked with a lot of people on this; we’re going to raise 1.9 billion dollars through this plan, not the wild numbers that some wanted. On the other hand, this is money that we need. So whether you’re a Democrat or a Republican, even Bruce Rauner has said publicly that we probably need more revenue, in the state coffers to make ends meet. Part of this is because due to the failure to have an agreement with the governor on what the budget ought to look like, 90+ percent of what would have been the budget is being ordered to be paid by federal courts; unfortunately, when the federal courts made those orders, they based it on revenue at the time that our tax was 5% across the board; as you know, that has been scaled back to 3.75%, but we’re paying out based on 5%, money we don’t even have. Amy Jacobson: So this progressive tax that you have offered, Governor Rauner is on board with this? Because this would have affected him directly; do you mean it’s one of those the only ones that can pay can afford it, but I feel like it’s penalizing the rich, and I fear that they may move out of Illinois, because yet here we go again. Lou Lang: Well first, Bruce Rauner does not support the plan. Second, there’s always this argument that people will leave one state for another over a slight increase in their tax rate. There’s not a lot of evidence of that in other states; all of the rich people didn’t leave the state of California that has a tax rate where the upper end is over 13%. They did not leave from Nevada, that has 0 attacks. People that live in the South did not move to Florida or Texas, because their tax is 0, and Governor Rauner likes to point the states around us as models. Truth is that in the state of Wisconsin, the upper level attaches around close to 9%, I believe, but it starts at $240,000 a year, so everybody making over $240,000 a year in Wisconsin is paying close to 9% in taxes. Let me also add that yes, under our plan, the upper level is 9.75%; it’s only on the increment, so in fact under this plan a millionaire, someone who makes a million dollars a year, their tax is maybe $11,000 higher than it would have been, however it’s still under 5% when you blend the rate together. So that person is not paying 9.75%; they’re paying 4.9% if they’re making a million dollars a year under this plan. Dan Proft: Well, a couple of points of order, just in response to what you said. Number one, you can’t just look at the income tax in isolation and compare to Wisconsin; you have to look at the overall tax per Illinois family face, and we’re fifth highest in the nation in terms of total tax burden according to the tax foundation with the highest property taxes in the nation, and they’re not going down; number two, in terms of people leaving Silicone Valley for Nevada, why don’t we keep it close to home? A study found that Chicago saw the third highest exodus of millionaires last year of any major city in the world behind only Paris and Rome. That’s real, and the exodus from Illinois of families to go all over the place, not just to our neighboring states, that’s also real, otherwise we wouldn’t be losing congressmen every time there is a census. Lou Lang: Dan, I have to tell you that the fastest growing major city in America is San Francisco, California, a state that has some of the highest taxes in the world. Dan Proft: That’s an outlier; what about what’s happening in Illinois Representative Lang. Lou Lang: What’s happening in Illinois is we have some financial difficulties, and I don’t think that someone making a million dollars a year is going to leave the state because their tax burden has gone up by 10-11 thousand dollars. Amy Jacobson: Karen Lewis yesterday liking Governor Rauner to an Isis recruiter? What’s your reaction to that and are you concerned? Lou Lang: I think that was a very poor choice of words, and I think those are fighting words that were inappropriate to the occasion, so I certainly don’t support that. I think we have to have cooler heads to get through our problems here in Illinois, and that certainly didn’t indicate a cool head. Dan Proft: Alright, he is Representative Lou Lang, a Democrat from Skokie. Representative Lang, thanks so much for joining us, appreciate it. Lou Lang: Have a great day.

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