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Wealth tax plan pushed in Springfield
Crain's Chicago Business
Tuesday, January 24, 2023 | Column | Greg Hinz
With plans for a second try at
passing a graduated income tax in Springfield facing an uncertain
future, an Illinois lawmaker is proposing a different way to squeeze
revenue out of rich people—really rich people.
Under a proposal being introduced by Rep. Will Guzzardi, D-Chicago,
anyone with a net worth of at least $1 billion would have to pay 4.95%
of it off the top to the state each year regardless of whether
investment markets are rising or falling and notwithstanding underlying
economic conditions. The tax on wealth—specifically on unrealized capital gains—is likely to
be controversial, even in Democratic-controlled Springfield. But it’s
part of a larger move nationally in which legislators in blue states are
acting on their own in the absence of progress in Washington on, for
instance, taxing carried interest and other lucrative devices used by a
small segment of the population.
“The bill’s prognosis is good,” said Guzzardi, whose measure also will
be sponsored in the Senate by Sen. Robert Peters, D-Chicago. “The
pandemic has only deepened the already wide economic disparity in this
state. We need to act.”
Guzzardi rejected the notion that his wealth tax is in some ways similar
to the much-hated property tax, which requires the owner of an asset to
pay up each year whether or not they’ve sold their land or building and
have the needed cash on hand.
“The property tax puts an enormous burden on a lot of people that have a
hard time making ends meet,” said Guzzardi, who represents a portion of
the mid-Northwest Side. “But people with assets of $1 billion or more,
I’m confident they’ll have the scratch to pay the bill.”
Guzzardi estimated his measure will pull in $200 million to $500 million
a year, even after last year’s departure to Florida of the state’s
wealthiest resident, Citadel’s Ken Griffin. He said proceeds would be
dedicated to three purposes, all on the spending side: child care
services, affordable housing and public education.
Key details on the as-yet-unfiled bill are not yet available, including
to what extent taxpayers would be able to offset investment gains with
losses, like depreciation. Guzzardi said he expects the Illinois
Department of Revenue will write rules detailing such matters.
Illinois is one of eight states including California and New York in
which Democratic lawmakers are introducing legislation to impose a state
wealth tax in the absence of federal rules. That absence allows many
partnerships, real estate holders and other wealthy individuals—such as
former President Donald Trump—to pay little if anything in federal taxes
even though they enjoy great wealth.
Earlier, another Illinois lawmaker, Sen. Rob Martwick, D-Chicago, said
he soon plans to introduce plans to revive a graduated income tax. Such a
constitutional amendment was rejected by voters in 2020, but Martwick
said he may tweak the measure to gain more backing.