(Bloomberg) — When Illinois Gov. JB Pritzker sought to raise income taxes on the wealthy at the height of the pandemic, Ken Griffin used his wealth to torpedo the initiative.

The billionaire financier still left the state for Florida two years later. Now, a handful of Illinois politicians are once again considering a new tax on top earners — a measure that risks alienating the state’s wealthiest residents, including in Chicago, in short order. money.

Next week, Illinois voters will vote on a proposed 3% additional levy on annual incomes above $1 million, with the proceeds going to relief property taxes. The passed measure is not binding, but its approval would potentially open the door to new debate after the failure of Pritzker’s 2020 plan, which called for raising income tax rates on high earners.

“This time around, we don’t have Ken Griffin to protect us,” said Dan Rahill, a wealth strategist at Chicago-based Wintrust Wealth Management, predicting that higher taxes would prompt more Illinois residents to consider to settle in nearby Wisconsin or Indiana. . Or Florida.

The latest tax vote will come amid a tumultuous budget season in Chicago, where Mayor Brandon Johnson is in conflict with the City Council and the public school system over gaping budget deficits. Johnson proposed a $300 million property tax increase this week, breaking a campaign promise, saying the increase was needed to close the city’s nearly $1 billion budget deficit.

At the same time, local leaders are increasingly turning to the city’s wealthy to fill budget shortfalls, even as Chicago and Illinois face persistent population declines and business departures .

Supporters of this year’s proposal say taxing millionaires would provide relief to ordinary homeowners struggling to pay Illinois’ notorious property taxes. Based on property taxes paid as a percentage of home values, the burden on Illinois residents is the highest in the nation, except for New Jersey, according to the nonpartisan Tax Foundation. The ballot measure would raise about $4.5 billion, according to a preliminary estimate from the Illinois Department of Revenue.

“This referendum is the first time people have a specific chance to develop a plan that can provide relief to a large number of ordinary people,” said Pat Quinn, a former Illinois governor who spearheaded the referendum. proposal.

The measure has the support of two fellow Illinois Democrats, U.S. Reps. Danny Davis and Chuy Garcia. Pritzker, also a Democrat, said he believes in a progressive income tax system as the ideal method for reducing 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 September news conference. “So I can see it might be popular among people, but as far as I’m concerned, a progressive 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 by far the largest donations. He spent about $50 million on the effort before abandoning Chicago two years later and moving to Miami.

Griffin’s Citadel empire was among a series of companies that left the Chicago area, including Caterpillar Inc. and Boeing Co., amid growing concerns about public safety, regulation and taxes.

The data is mixed on whether high-tax environments actually drive wealthy people to move to other states, said Chris Berry, a property tax expert at the University of Chicago. But a more direct approach to easing the property tax burden would be to rein in local government spending that is “out of control,” he said.

“Only in Illinois will you find politicians who think the way to fix the tax boom is to create yet another tax,” Berry said.

Population decline

The state’s population declined by more than 87,000 in 2022, translating to a loss of $9.8 billion in adjusted gross income, according to the Internal Revenue Service. Adding that to declines in the previous four years, capital outflows over five years totaled $41.7 billion.

Because the tax measure slated for the November ballot is nonbinding, it may never have practical effect. But few issues galvanize Illinois residents, and especially Chicagoans, more than property taxes. And the pressure on local authority revenues will probably increase.

After the city’s southern suburbs saw a substantial increase in property taxes this summer, Cook County Assessor Fritz Kaegi proposed “circuit breaker” legislation, suggesting the state find a source of funding to provide some sort of relief to low-income homeowners who benefit from a large 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 financed by the millionaires’ tax.

“If you want to emphasize homeownership as a positive thing for our society and our economy, then you don’t want to have an excessive property tax burden,” Quinn said. “We need to do something, rather than complain.”

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