If Illinois adopts Gov. J.B. Pritzker’s progressive tax proposal, some couples could take a tax hit for getting married while others could get a break, according to tax experts.
Married taxpayers who file jointly with the federal government apply their taxable income to different brackets than people filing separately. The thresholds are higher so they don’t hit dual-income couples with higher tax rates. There’s no mention of that in Pritzker’s proposed tax rates for Illinois.
This could mean dual-income couples would pay more, said Joe Rosenberg, a senior research associate with the Urban-Brookings Tax Policy Center at the Urban Institute.
“They’re more likely, in a progressive income tax system, to face a marriage penalty,” he said.
Taxpayers Federation of Illinois president Carol Portman said it will be more complicated than the state's existing flat income tax, regardless of the taxation levels.
“It’s an issue that we’ve been able to avoid for all of these years because we’ve had a flat tax rate, meaning it doesn’t matter how much or how little you earned,” she said. “Throwing in a graduated rate structure makes us have to think about that.”
If the final enacted progressive tax does contain different tax brackets for joint filers, Rosenberg said single-income couples filing jointly could see more favorable rates, meaning “they could actually, as a combined unit, pay less in tax than they would together as two individuals.”
Fifteen states have what amounts to a marriage penalty for joint filers in their tax rates, according to the Tax Foundation. The marriage penalty, author Katherine Loughead said, could be severe for a married business owner whose company would see higher effective rates just for adding a spouse’s income into the business’ reported income.
Because the state's constitution mandates a flat income tax, a supermajority of lawmakers in both the House and Senate must vote to place a constitutional amendment on the ballot, then a supermajority of voters must approve it. The earliest voters could see such an amendment on the ballot is 2020.