Crain's Chicago Business: Graduated tax is no panacea—and could hurt state, Moody's says

Gov. J.B. Pritzker's proposed graduated income tax has the potential to boost Illinois' rock-bottom credit rating, but it could backfire, especially if proceeds are used for the wrong purposes.

That's the view from Moody's Investors Service as the credit rating agency gave a distinctly mixed view as to whether the tax, aimed at pulling in an additional $3.4 billion a year in revenue, is worth the pain and potential harm to the state's economy.

On the one hand, Moody's points out in a new report, the gap between what should be paid to keep unfunded state pension liabilities from growing and what the state actually budgets each year is about $3.5 billion. If that gap was closed with graduated income tax receipts, total unfunded liability— now a record $133.5 billion—might actually drop.

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