The tax's supporters argue that it will address Illinois' budget shortfall of $3.4 billion in fiscal year 2021, stabilizing a jurisdiction that the libertarian-leaning Mercatus Center has ranked the least fiscally healthy state in the nation. But the Illinois Policy Institute, a free market think tank, argues that the Pritzker administration has overestimated the revenue the tax would raise. Even if the higher tax rates do not slow down economic growth, IRS data indicate that the tax would raise roughly $2.4 billion, not the $3.4 billion promised.For now, the powers that be are selling the referendum as "only a few people will pay more taxes," and implicitly they deserve to pay more. But there's no guarantee, particularly given the parlous state of Illinois government finances, that more people won't be on the hook for additional taxes.
Another defense of the law points out that it will not raise taxes for the 97 percent of taxpayers that make less than $250,000. Yet given the size of Illinois' long-term fiscal problems, a progressive tax system could mean future tax increases on the middle class once the rich have been soaked.
Another concern is that high-income earners will respond by leaving the state, a phenomenon known as tax flight. Advocates of tax increases have proclaimed that tax flight is a myth, citing a study by the Stanford sociologist Cristobal Young that found a 10 percent increase in the tax rate would produce an exodus of 1 percent of millionaires. Young's work doesn't debunk the concept of tax flight so much as suggest it's a fairly marginal phenomenon with few implications for public policy.
But more recent research suggests otherwise. A National Bureau of Economic Research study published in April found that high-income individuals' migratory responses to high taxes can be quite high, depending on the proximity of lower-tax jurisdictions, individuals' roles in the labor market, and the level of human capital.
ILLINOIS IS A TAX HELL.
There's a constitutional amendment that has to be approved by the voters to turn up the heat. But only on rich people.