When Illinois Governor JB Pritzker sought to boost the state income tax on the rich at the height of the pandemic, Ken Griffin used his fortune to torpedo the initiative.
The billionaire financier still quit the state for Florida two years later. Now, a handful of Illinois politicians are once again eyeing a new tax on the highest earners — a move that risks alienating the state's wealthiest residents, including in cash-strapped Chicago.
Next week, Illinois voters will weigh in on a proposed extra levy of 3% on annual incomes of more than $1 million, with the proceeds going to ease property taxes. The ballot measure is nonbinding, but approval would potentially open the door to a new debate after the failure of Pritzker's 2020 plan, which called for raising state income tax rates on higher earners.
"This time around we don't have Ken Griffin to protect us anymore," said Dan Rahill, a wealth strategist at Chicago-based Wintrust Wealth Management, predicting that higher taxes would prompt more Illinois residents to consider establishing residency in nearby Wisconsin or Indiana. Or Florida.
The latest tax vote will unfold amid a tumultuous budget season in Chicago, where Mayor Brandon Johnson is feuding with the city council and the public-school system over yawning fiscal shortfalls. Johnson proposed a $300 million property-tax hike this week, breaking a campaign promise, saying the increase was needed to close the city's budget deficit of almost $1 billion.
At the same time, local leaders have increasingly been looking to the city's wealthy to plug budget gaps, even as both Chicago and Illinois contend with persistent population declines and corporate departures.
Backers of this year's proposal say taxing millionaires would bring relief to everyday homeowners struggling to pay Illinois's notorious property levies. Based on property taxes paid as a percentage of home values, the burden on people in Illinois is the highest in the country except New Jersey,
"This referendum is the first time where people have a specific chance to lay out a plan that can give relief to broad numbers of everyday folks," said Pat Quinn, a former Illinois governor who's spearheading the proposal.
The measure has backing from two of Quinn's fellow Illinois Democrats, Rep. Danny Davis and Chuy Garcia. Pritzker, also a Democrat, said he believed in a graduated income tax system as the ideal method to lower property taxes in Illinois but said the referendum could be popular with voters.
"We all believe in lowering property taxes in the state of Illinois," Pritzker said at a press conference in September. "So I can see that it might be one that is popular among people, but as far as I'm concerned, a graduated income tax is the way to go."
Two other Chicago billionaires, Pat Ryan and Sam Zell, contributed to the 2020 fight against Pritzker's approach, but Griffin made the largest donations by far. He spent about $50 million on the effort before ditching Chicago two years later and moving to Miami.
Griffin's Citadel empire was one in a string of companies leaving the Chicago area including Caterpillar Inc. and Boeing Co. amid rising concerns over public safety, regulation and taxes.
The data is mixed on whether high-tax environments really push wealthy people to move to other states, said Chris Berry, a property-tax expert at the University of Chicago. But a more straightforward approach to easing the burden of property taxes would be to rein in local government spending that's "out of control," he said.
"Only in Illinois will you find politicians who think the way to cure runaway taxes is by creating yet another new tax," Berry said.
Population decline
The state population fell by more than 87,000 in 2022, which translates to a loss of $9.8 billion in adjusted gross income, according to the Internal Revenue Service. Adding that to declines from the four years before that, the five-year outflow totaled $41.7 billion.
Since the tax measure on the November ballot is nonbinding, it may never have any practical effect. But few issues galvanize Illinois residents, and especially Chicagoans, more than property taxes. And the pressure on local-government revenue is likely to rise.
After the city's south suburbs saw a substantial jump in property taxes this summer, Cook County Assessor Fritz Kaegi proposed "circuit-breaker" legislation, suggesting that the state find a funding source to provide some sort of relief for low-income homeowners who get a sharp increase in property taxes.
Quinn, the former governor, said the ballot measure he supports could work in concert with Kaegi's circuit breaker proposal — and both could be funded by the millionaire tax.
"If you want to emphasize homeownership as a positive thing for our society and our economy, then you don't want to have a property tax burden that is excessive," Quinn said. "We need to do something about it, rather than just complain about it."
