An Illinois Wealth Tax Would Be a Legal Disaster
Illinois' latest tax scheme, a 4.95% "wealth tax" on unrealized gains for billionaires, risks violating the state constitution, likely resulting in a long and costly legal battle.
The proposed tax is part of a plan to generate $1.5 billion for the Regional Transit Authority and close its $200 million budget gap. Lawmakers propose a first-of-its-kind "billionaire tax" which would tax unrealized gains on assets at 4.95%, equivalent to the state's flat income tax rate.
The bill would likely face a lengthy legal challenge as the Illinois constitution prohibits additional income taxes or personal property taxes. Currently, capital gains, which include assets such as stocks, real estate, or private business shares, are taxed only when they are sold and income is realized.
- Under the new proposal, Illinois residents with net assets exceeding $1 billion would calculate the market value of these assets each year.
- They would pay a 4.95% tax on the appreciation.
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Author's summary: Illinois' wealth tax plan may violate the state constitution.