CHICAGO (Reuters) - Illinois Governor J.B. Pritzker pitched a graduated personal income tax rate scale on Thursday that he said would generate additional revenue of an estimated $3.4 billion for the financially challenged state.
The Democrat, who took office in January, wants to replace Illinois' current flat tax rate of 4.95 percent with rates that increase with income levels - the key component in his plan to address the state's fiscal woes.
"Instituting a fair tax as I've proposed will improve the arc of our state finances forever," Pritzker told reporters in the state capitol in Springfield, adding that he was ready to negotiate with both Democratic and Republican lawmakers.
A huge unfunded pension liability of $133.5 billion, along with chronic structural budget deficits, led to downgrades that pushed the state's credit ratings to a notch or two above the junk level.
Pritzker's proposed rate scale ranges from 4.75 percent for low earners to 7.95 percent for annual incomes of $1 million or more. The corporate income tax rate would rise to 7.95 percent from 7 percent.
A constitutional amendment to change the tax structure would have to be placed on the ballot by a three-fifths vote in Illinois' Democratic-controlled House and Senate and approved by voters.
Senate President John Cullerton "looks forward to a comprehensive, bipartisan discussion on this issue, one that is frankly long overdue," his spokesman John Patterson said in a statement.
Republican lawmakers in the House have already introduced a resolution opposing the creation of a graduated tax rate system.
The governor's announcement comes as he prepares to meet with credit rating agencies next week ahead of a $300 million general obligation bond sale in April to help fund a pension benefit buyout program.
Fitch Ratings and S&P Global (NYSE:SPGI) Ratings have expressed credit concerns about the nearly $39 billion fiscal 2020 general funds budget Pritzker proposed last month.
The governor's spending plan for the fiscal year that begins on July 1 includes one-time revenue measures, as well as a seven-year extension of a 50-year pension payment plan that would reduce the state's contribution to its five retirement funds by more than $800 million.
