Illinois’ Billionaire Tax: A Risky Move?

Illinois’ latest tax scheme, a 4.95% “wealth tax” on unrealized gains for billionaires, risks violating the state constitution and could lead to a long, costly legal battle.

Lawmakers are proposing a first-of-its-kind “billionaire tax” to generate $1.5 billion for the Regional Transit Authority and close its $200 million budget gap. This tax would apply a 4.95% rate to unrealized gains on assets – the same as the state’s flat income tax rate.

The bill will likely face a importent legal challenge. The Illinois constitution prohibits additional income taxes or personal property taxes, making the legality of taxing unrealized gains questionable.

How the tax Works

currently, capital gains – including assets like stocks, real estate, and private business shares – are only taxed when sold and income is realized. This new proposal changes that. Illinois residents with net assets exceeding $1 billion would calculate the market value of their assets annually and pay a 4.95% tax on any thankfulness.

However, losses on capital gains would not be recognized for tax purposes.