Illinois Chamber of Commerce study forecasts job cuts to women and minorities, shrinking economy with graduated income tax. Advocates say not so fast.

A study funded by the Illinois State Chamber of Commerce forecasts that if voters approve a new graduated income tax rate structure on Nov. 3, the state’s already pandemic-damaged economy will shrink, more people will leave the state, consumer costs will increase and jobs, particularly those held by women and minorities, will be lost.

But advocates of the proposed state constitutional amendment pointed to a variety of previous studies that contradict many of the findings of the analysis done for the chamber, which said the study’s authors were given “complete independence.”

The chamber, an opponent of the proposal to replace the state’s mandated flat-rate tax with a graduated-rate tax based on income, presented the “key findings” of the analysis conducted through the Berkeley Strategy Group, a nationally recognized consultancy group to businesses, but released little research of how the findings were reached.

The findings noted that the economic impact of switching to a proposed graduated-rate tax are different now due to the effects of the coronavirus disease than when Democratic Gov. J.B. Pritzker proposed his signature agenda item.

“Consequently, rather than eliminate jobs from a relatively strong economy that might have been capable of quickly replacing them, the proposed graduated income tax will now result in job losses that will further weaken an already weak economy,” said the authors, who included economics professor Ariel Belasen of Southern Illinois University at Edwardsville.

Under tax rates approved by lawmakers if the proposed amendment is ratified by voters on the November ballot, an estimated 97% of individual taxpayers would pay at least the same if not less state income tax than they do now. Under the plan, people with incomes of up to $250,000 would pay 4.95% or less.

Pritzker had forecast the new tax structure would raise $1.4 billion in the last half of the current budget year, which began July 1, and would raise $3.4 billion for a full fiscal year. Those figures came before the state’s economy was basically shutdown in March under stay-at-home orders Pritzker issued in March and have since been gradually lightened.

The chamber’s study forecast a $1.8 billion reduction in the income of Illinois residents. It also predicted that increased business taxes would be passed along to consumers, and the loss of jobs in the hospital, restaurant, and individual and family services categories. It said the job losses would disproportionately affect women and minorities who make up more workers in those categories.

The study forecast out-migration from Illinois among residents seeking to escape the tax burden, leading to a reduction of spending of 0.8%. It also said for many tax filers in lower-income brackets, the tax relief offered “might be less than a single-family meal at a fast food restaurant.”

“This independent study concludes what many of us already knew: This is the worst possible time for a $3.4 billion tax hike on Illinois families and businesses,” said Todd Maisch, the state chamber’s president.

But Quentin Fulks, chairman of the amendment advocacy group Vote Yes for Fairness, questioned the independence of the study as well as its findings.

“It’s not surprising that a study the Illinois Chamber of Commerce paid for in their efforts to protect our broken tax system is trying to mislead voters on the impact of the Fair Tax,” Fulks said.

“The fact is our current tax system is fundamentally unfair, forcing essential workers like our nurses and grocery store clerks to pay the same tax rate as millionaires and billionaires. The Fair Tax will set things right,” said Fulks, whose group has received $56.5 million in funding from the wealthy governor.

The advocacy group cited studies showing limited correlation between state tax rates and out-migration of wealthy taxpayers; that states with graduated income tax rates are more likely to cut future taxes than raise rates; and that high rate tax states have seen higher economic growth than states with no income tax levy.

The chamber’s study came as the AARP’s national organization reported putting $450,000 in the state organization’s campaign fund, Yes to a Financially Responsible Illinois, in support of the proposed amendment.

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