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GENERATING NEW REVENUE, IMPROVING TAX FAIRNESS A POLICY STRATEGY FOR INCOME TAX REFORM IN ILLINOIS

By Larry Joseph

Abstract

This issue brief proposes a policy strategy for fiscal reform that links a higher individual income tax rate to a reform package with three components: a higher personal exemption, which would benefit all households and would make the state income tax structure more progressive; a more generous state earned income tax credit targeted at the working poor; and a child tax credit to provide additional relief for both low-income and middle-income families. The issue brief outlines three alternative tax reform plans and presents estimates of changes in tax liability for families at different income levels, as well as estimates of new state revenue that would be generated under each plan. Three months ago, Governor Rod Blagojevich submitted to the Illinois General Assembly an ambitious budget for FY 2008 that included major initiatives for education funding and access to health care, as well as a plan for sounder financing of the state’s pension systems. The principal source of revenue for these initiatives was a new gross receipts tax (GRT) on nearly all business transactions in the state. The GRT was designed to generate $7.6 billion by FY 2009. In mid-May, the House of Representatives overwhelmingly rejected the Governor’s GRT plan. Since then, there has been no agreement on a viable alternative for generating revenue to meet th

Year: 2013
OAI identifier: oai:CiteSeerX.psu:10.1.1.371.1049
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