How Will the Proposed Illinois Fair Tax Law Affect Married Couples?

 Posted on April 03,2019 in Family Law

When Illinois Governor J.B. Pritzker announced a proposal for his new tax plan in Illinois, he sparked debate throughout the state. Some praised what Pritzker called the fair tax law, saying it would only tax the rich and provide more money for low to middle wage earners. However, others have pointed to a major flaw in the proposal, and those opposed to it say it is going to hurt one more group: married couples.

The Marriage Penalty Under Fair Tax Law

Traditionally, when a couple jointly files their state or federal taxes, they file in separate tax brackets from those that file individually, allowing them to take advantage of tax savings. However, whenever two earners of the same household owe more taxes by filing jointly instead of separately, it is considered a marriage penalty. The new tax law proposed by Governor Pritzker does not provide different brackets that allow couples to reap more savings. Instead, couples are likely to owe higher taxes.

Under the proposed new tax law, when filing separately, each of the spouses’ first $10,000 earned is taxed at 4.75 percent. The next $90,000 earned is taxed at a rate of 4.9 percent. However, when a couple is married and filing jointly, the very first dollar made from the second income is taxed at an even higher rate of 4.95 percent.

In response to the comments made regarding this potential marriage penalty, Pritzker stated that no couple decides to get married based on tax benefits. That is likely true. However, no couple should face a penalty simply due to their decision to get married. In addition, while people may not marry for money, they certainly divorce over it. Some opposed to the proposed plan also say it could wreak havoc on marriages across the state, as families may now pay thousands more in taxes every year.

The Effect on the Workforce

Some that argue against the new law say it will not just hurt families, it will hurt the state’s economy, too. This is because if parents of young children are making the decision to return to the workforce or stay at home, they will weigh every factor in that decision, including tax penalties.

When a family is only earning one income, they can avoid the marriage penalty, because only one person is taxed at lower rates. In addition, even with a dual income in the home, it simply may not be worthwhile for many parents to return to the workforce only to face a high tax bill at the end of the year.

This is something married couples will have to decide for themselves if the new tax law is passed. It is also something that could potentially hurt the labor force, thereby affecting the state’s economy.

Learn How an Illinois Family Lawyer Can Help

Many across the state are hoping that Governor Pritzker’s plan does not go through. If it does, it is going to have many Illinois families reconsidering their priorities. For families that need help with these issues, skilled Palatine family law attorney Nicholas W. Richardson is here to help. If you are considering divorce and are trying to determine how your income and taxes will be affected, call our office today at 847-873-6741 to discuss your case in a free consultation.

Resources:

https://www.illinoispolicy.org/pritzker-fair-tax-could-cost-typical-aurora-family-550/

https://taxfoundation.org/illinois-fair-tax/