The new year is upon us, and while inflation is devouring everyone’s earnings, we can be thankful there is one less inflationary concern this year: the Fair Tax.

The legislation behind the failed attempt to pass a constitutional amendment in 2020 that would have allowed for a graduated state income tax, marketed as the Fair Tax, unwisely did not include a provision for protection against inflation, more commonly known as inflation indexing. Indexing tax brackets against inflation ensures that income taxes don’t grow faster than the incomes they’re based on. Without it, every year there is inflation under a graduated income tax, there is an automatic, hidden tax hike. Politicians like automatic, hidden tax hikes. This was a feature of the Fair Tax, not a bug.

That ballyhooed $250,000 tax bracket where only the top 3% of taxpayers would have paid more in taxes under the Fair Tax? With 6.8% inflation, that threshold would now essentially have been $233,000 after just one year. $100,000 tax bracket? Now $93,200. And on and on it would have gone as each tax bracket continued their inevitable descent toward the lower and middle class. All taxpayers, from McDonald’s fry cook to McDonald’s CEO, would be hit with a tax hike this year had the Fair Tax passed.

It’s not that the state legislature isn’t aware of inflation exists. Quite the contrary. When they doubled the motor fuel tax a couple of years ago, they indexed the new rate to inflation. Even the caps on political contributions are indexed to inflation. If you’re surprised that politicians would prioritize their political action committees and deep-pocketed lobbyists over taxpayers, you haven’t been living in Illinois very long.

I attended Fair Tax public hearings and recall when its proponents were confronted on this matter, they countered that inflation wasn’t a concern. Except that is the very reason why you index monetary thresholds against inflation, so you don’t have to concern yourself. The necessary adjustments happen automatically. No thought required.

Until the Biden administration decides to address inflation with something other than a shoulder shrug, expect high inflation to stick around. Until then, know that our flat state income tax has inflation indexing already built-in. Small consolation in the grocery check-out line, but consolation nonetheless.

Nicholas Binotti, Oak Park

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