When Illinois voters head to the polls in November, they’ll vote on a proposal to amend the state’s constitution and create a graduated income tax system. Dubbed the Illinois Fair Tax, the amendment would sunset the state’s current flat tax structure in favor of a system that is more just and equitable for Illinois’ working class.
The usual suspects — secular and religious — have expressed opposition to the proposal. Fearmongers and conspiracy theorists warn the Fair Tax will create a retiree tax, a double tax and other fiscal boogeymen. More rational opponents of the amendment base their arguments on the belief that a flat tax structure is, by nature, the fairest form of taxation.
But is that really true?
Does a flat tax structure provide an income tax system that is truly fair to all state residents?
Or, in addition to the financial benefits for the state, are there spiritual and ethical reasons why a graduated or fair tax system offers a more just and morally responsible tax structure for Illinois and other states?
What is the Illinois Fair Tax Proposal?
Illinois is one of eight U.S. states with a flat-rate income tax system, and one of four states that requires a flat income tax in its constitution. The federal government and 33 states — including almost all of Illinois’ neighbor states — have graduated income tax systems.
Illinois’ current tax rate is 4.95% across the board. Under the Fair Tax proposal, the tax rate would remain unchanged for incomes between $100,000 and $250,000. Incomes less than $100,000 would be taxed at a slightly lower rate, while incomes higher than $250,000 would be taxed at a progressively higher rate, capped at 7.99% for annual incomes over $1 million.
Only incomes above $250,000 would see an increase in their state tax rate under the Fair Tax proposal. More than 90% of the state’s residents would receive a tax cut.
Proponents of the Fair Tax argue that a flat tax creates an unjust hardship for middle- and working-class families because it forces them to pay a larger share of their total income in taxes.
For example, someone earning $25,000 and paying a flat tax of 10% is forced to live on $22,500 a year, while someone earning $1 million under the same flat tax structure enjoys $900,000 in disposable income.
It defies logic to argue that applying the same tax rate to both taxpayers (the one earning $10,000 and the one earning $1 million) even remotely resembles fair taxation.
The argument over the Illinois’ Fair Tax extends well beyond the Illinois state line. It directly speaks to the issue of income inequality and challenges us, as a nation, to confront the profound injustices associated with unfair distribution of wealth.
The Fair Tax debate and the moral value of money
We’ve been here before. In 1894, Congress launched a national debate over a proposal to enact the United States’ first peacetime income tax. Voices from every corner of society expressed opinions for and against a graduated tax structure, with many serving up the same arguments that have surfaced in the Illinois’ Fair Tax discussion.
Ironically, some of the most persuasive arguments for the graduated income tax in 1894 came from the religious sphere.
Religious proponents of the 1894 graduated tax based their support on the clear biblical mandate for the wealthy to care for the poor. They also cited the centuries-old Judeo-Christian tenet that those with higher incomes should pay more.
But the most compelling religious case for a graduated income tax system — like the Illinois Fair Tax — involved something Joshua Cutler refers to as the decreasing moral value of money. Building on biblical sources (Matt. 18.12, Luke 15.4, Mark 12.41ff., Luke 16.19-31 and others) proponents argued that lower levels of earned income are inherently more valuable than higher levels of wealth, “which they viewed as unearned and morally suspect.”
The decreasing moral value of money concept gained support both inside and outside of the religious community. Notable proponents of the concept included Theodore Roosevelt and William Jennings Bryan.
But more importantly, the moral value of money concept offers useful insights into the current debate over Illinois’ Fair Tax and the larger issue of income inequality. The lesson?
The true value of money isn’t defined by numbers on a spreadsheet. At its essence, all money has moral value — and that value is defined by what it is used for.
For example, an individual earning $25,000 a year uses their entire income to pay for basic necessities like food and housing. On the other hand, an individual earning $250,000 or more a year enjoys a significant amount of disposable income that they use to either buy non-essential items or accumulate wealth.
In a flat tax system, low-wage earners are taxed on the funds they require for survival, while high-wage earners pay the same tax rate while living in extreme abundance.
Modern-day opponents of the Fair Tax argue that this scenario is just capitalism at work — that in America, those who “work hard” enjoy the fruits of their endeavors.
It’s an ignorant argument, at best. Low wage-earners work just as long and hard as high wage-earner. In many cases, they work harder.
But more to the point, I would argue that there’s nothing “American” about a flat-tax structure at all. For more than a century, the United States has codified the decreasing moral value of money in its tax policy. In our graduated federal income tax system, those who earn more are expected to pay a higher tax rate.
From a spiritual and ethical perspective, the argument is even clearer. A flat tax system is more than just a bad idea. It’s anathema — an abomination to the historical Judeo-Christian values that inform our responsibility to the common good.
A final word for Protestants
Justice-minded Christians aren’t alone in supporting a graduated tax system. Both Judaism and Islam support the idea that wealthy taxpayers should pay a higher rate than the working class. In fact, the Islamic tenet of zakat supports taxing individuals on wealth — not income. The decreasing moral value of money strikes again.
But as a Protestant clergyperson, I’m acutely aware of the arguments my conservative peers offer in support of a flat tax. And the practice of tithing sits at the top of that list.
A tithe is the donation of 10% of your income to your church. Protestant ministers — especially evangelicals — regularly hammer home the importance of tithing, mostly because they depend on it to fund their operations. Whether you make $25,000 a year or $250,000 a year, one out of every 10 dollars you earn goes to the church.
The tithe is essentially a religious flat tax. So, if it’s good enough for the church, religious conservatives argue, it’s good enough for government.
Religious opponents of the graduated tax system raised the same argument in 1894 and immediately met with resistance. It turns out the American people aren’t interested in operating the government like a local church.
But I know firsthand that Protestant churches — even so-called “tithing churches” — don’t practice what they preach. Although they preach the tithe, when the coffers run low, pastors appeal to wealthy congregants for additional donations. “If you’ve got more, give more” is a common mantra in these churches.
When push comes to shove, tithing churches practice a graduated “tax” system. So, when these individuals advocate for a flat tax system in the public sphere, it’s hypocrisy. Plain and simple.
A graduated donation system is the right move for churches because it’s fair and just. And it’s no less fair and just for the citizens of Illinois.
When Illinoisans head to the polls in November, they’re voting for more than a tax rate. In many ways, their votes will determine what we aspire to as a nation …
Will we be a nation that enables the accumulation of exorbitant wealth at the expense of the poor and working class?
Or will we remember the spiritual values at the heart of our faith traditions, and adopt a tax system rooted in fairness and economic justice?
I hope we do the right thing. And so should you.