For billionaire Ken Griffin, spending $54 million to prevent him and other wealthy Illinoisans from paying more tax was well worth it.
By the time Illinois voters flocked to the polls on election day in 2020, Griffin—at the time the state’s richest resident—had made sure they had heard plenty of arguments against voting to raise taxes on him and other wealthy residents of the state. His tens of millions were used to fund an endless stream of flyers and advertisements opposing a ballot initiative that would have allowed Illinois lawmakers to join 32 other states in raising taxes on the wealthy at a higher rate than on everyone else.
Griffin ultimately spent $18 on average for each of the 3.1 million votes against the initiative. Despite initial optimism regarding its chances, the measure was defeated after falling short by hundreds of thousands of votes.
Rarely does the general public get a clear picture of the benefits for wealthy Americans who invest money to influence politics. However, in this instance, ProPublica’s wealth of IRS data can offer vital context for the election dispute. Griffin and several other extremely wealthy Illinois residents felt that spending even such a large sum of money was well worth it in comparison to what a possible tax increase might have cost them.
The information shows that from 2013 to 2018, Griffin earned an average of $1.7 billion annually. That ranked fourth in the nation, just behind individuals like Bill Gates.
Using that median income as a benchmark, the new state tax increase, which sought to increase the rate from 5 percent to 8 percent on the highest incomes, would have resulted in an additional tax burden for Griffin of about $51 million annually. In particularly prosperous years, such as 2018, when Griffin reported income of nearly $2.9 billion, he might have been required to pay more than $80 million.
Griffin’s Citadel representative responded on his behalf, pointing out that from 2013 to 2018, Griffin paid the second-highest amount of taxes of any American, based on data previously published by ProPublica. In a statement, he claimed that over the previous ten years, “Ken has almost certainly been the biggest individual taxpayer in the state of Illinois — a state known for extravagant spending and widespread corruption.” Griffin has stated that he is not opposed to tax increases, but he opposed the proposal because “Illinois needs to put its fiscal house in order before burdening hardworking families with yet more taxes,” he added in his statement.
The state’s current flat tax rate, which stands at 5%, is considerably lower than the top rates in other sizable states led by Democrats, like California and New York, and on par with those in some states led by Republicans, like Utah. The state of Illinois needs more money, according to proponents of higher taxes on the wealthy, who point to the state’s ongoing budget deficits and massive pension liabilities.
Griffin’s political wagers don’t always pay off. He spent tens of millions of dollars endorsing an Illinois governor candidate who lost the Republican primary in June. Griffin revealed last month that Citadel’s headquarters would be moving to Miami, along with him, despite the income tax initiative being defeated.
Griffin contributed tens of millions of dollars, and no other donor to the anti-tax cause came close to matching it, but others made contributions that were higher than what the majority of Illinois households make in a year. ProPublica examined the tax records of nine additional extremely wealthy Griffin backers. This group of heirs and business owners, which includes some of the wealthiest individuals in Illinois, can anticipate seeing a healthy return on their contributions and saving millions in taxes over the upcoming years, in our estimation.
Our estimate’s math is straightforward: Rich Illinois residents will save about 3% of their income since that was the amount of the proposed tax increase on the wealthy. In essence, that is how Illinois state income taxes operate for residents of Illinois. The income reported on their federal returns is converted to a state tax rate with some modifications. All ten of the anti-tax donors listed in this article and the accompanying chart were contacted by ProPublica. Nobody objected to the method used to calculate their tax savings.
Given his recent average annual income of $492 million, Richard Uihlein, who along with Griffin has emerged as a conservative megadonor on the national stage, contributed $100,000 to the anti-tax campaign. Uihlein has also donated millions of dollars to the Illinois Policy Institute, a small-government organization that opposed the graduated tax plan, through his family foundation. With Uihlein’s typical income, the failure of the ballot initiative would result in annual tax savings of about $15 million.
Sam Zell, a prominent real estate developer in Chicago who organized a leveraged buyout of the Tribune Company prior to its bankruptcy, contributed $1.1 million. According to his most recent earnings, he would avoid paying $1.6 million in taxes annually. A Zell representative declined to comment.
Patrick Ryan made his billions in the insurance industry, and thanks to the hundreds of millions he has donated to Northwestern University, both the football stadium and basketball arena bear his family’s name. He donated $1 million. His most recent earnings indicate a $2.1 million annual tax savings.
We estimate that Richard Colburn, whose billionaire family owns the electrical parts manufacturer CED, donated $500,000 to the anti-tax movement, which would enable him to avoid paying $5.5 million in taxes annually. Colburn explained his opposition to the graduated tax in an email to ProPublica, saying that his reasons were straightforward: It would have significantly reduced his investment profits, some of which he donates to a nonprofit foundation he oversees. He asserted, like Griffin, that the state would not have made good use of the funds.
Although I enjoy living in the Chicago area, I could save a ton of money by relocating to a state with lower taxes, so I “invested” to reduce the temptation to do so, Colburn wrote. Another component of my “investment” is motivated by my desire to stop the state of Illinois from overspending whenever Springfield has extra cash, as stated in the statement. (Read his entire statement here.)
The trading company DRW’s founder, Donald Wilson, donated $250,000 to the anti-tax cause. When compared to his potential tax savings, that donation in particular appears modest: Wilson’s average annual income is $114 million, so the proposed tax increase would have increased his yearly expenses by $3.5 million.
Trusts, unique legal entities frequently used by the wealthy to hide or protect assets as well as to avoid the estate tax, provided some of the funding for the anti-tax campaign. Through his Celebrate Life Trust, Richard Stephenson, who founded the Cancer Treatment Centers of America hospital network, gave $300,000. Ayn Rand’s message of unwavering self-interest is so dear to Stephenson, a longtime Republican donor, that he served as executive producer on two films based on the book “Atlas Shrugged.”
Requests for comment from Uihlein, Ryan, Wilson, and Stephenson also went unanswered.
The Philip M. Friedmann Family Charitable Trust made one $25,000 donation. Friedmann amassed wealth by selling his co-founded greeting card business to a private equity company.
Unlike Stephenson, Friedmann’s trust is a private foundation. In other words, Friedmann probably received a tax break for giving to his own charity, which later used some of the money to fight an increase in his taxes.
According to three nonprofit tax law experts who spoke with ProPublica, Friedmann’s foundation’s donation to the anti-tax campaign appears to have broken federal tax law. According to Lloyd Hitoshi Mayer, a law professor at Notre Dame, personal foundations are prohibited from spending money to try to influence legislation, a category that includes donations to a ballot initiative committee. Businesses that violate this law must attempt to recover the money they spent as well as pay a fine of up to 25% of the total amount.
Although this restriction is explicitly stated in the IRS’ online guide for private foundations, Ellen Aprill, a law professor at Loyola Marymount University, claimed that “smaller family foundations don’t always know the applicable rules.”
Attempts to reach Friedmann for comment were unsuccessful.
Illinois didn’t have any kind of income tax until 1969, when Democratic Chicago Mayor Richard J. Daley and Republican Governor Richard Ogilvie reached an agreement that resulted in a flat statewide tax of 4 percent on corporations and 2.5 percent on individuals. Democrats who claimed the tax unfairly targeted low-income families advocated for higher rates for the wealthy. Republicans and other opponents, however, argued in favor of expiration dates or rate caps, stating that in the absence of such measures, lawmakers would simply keep raising and broadening income taxes. A compromise was written into the state’s revised constitution the following year. The General Assembly was given the authority to enact an income tax, but only “at a non-graduated rate,” it was made clear.
Governors and legislators kept raising the flat tax rate until it reached 5% on individuals as the state’s financial issues grew over the ensuing decades. Griffin supported Republican candidate for governor in 2014, multimillionaire private equity investor Bruce Rauner, who had pledged to cut taxes. The rate was lowered to 3.75 percent. However, the state’s financial situation worsened as a result of Rauner’s protracted standoff with the Democratic-controlled General Assembly, which left the state without a budget for more than two years.
In 2017, the General Assembly voted to increase the individual income tax rate once more, to 4.95 percent.
JB Pritzker, a Democrat and billionaire investor whose family established the Hyatt hotel chain, ran for governor by portraying himself as a wealthy man who would stand up for the middle class and support a graduated tax system that would be less onerous for low-income families than the flat-rate system. Rauner promised to thwart him. Before Pritzker won that November, their combined 2018 campaigns spent more than $250 million, including $22.5 million that Griffin gave to Rauner.
An ambitious and wealthy governor’s support made a graduated income tax in Illinois suddenly seem feasible.
Ralph Martire, executive director of the Center for Tax and Budget Accountability, a think tank that promoted a graduated income tax, said: “That created a bunch of new momentum.” “That was sufficient political backing to really get grassroots organizations working on it.”
A three-fifths majority is required in the Illinois House and Senate to approve a state constitutional amendment absent a special convention. A clear majority of all voters casting ballots in a general election or a three-fifths majority of those voting on the measure itself are required for approval after that.
In 2019, the Senate and House both passed legislation that would lift the prohibition on graduated income taxes if voters approved an amendment. Companion legislation specified the details of the new tax structure: For those reporting income up to $250,000, rates would either decrease or remain at 4.95 percent; after that, they would increase to a rate of 7.99 percent for single people making over $750,000 and for couples making over $1 million. The top rate was higher than Missouri’s but lower than Iowa’s, falling within the range of other Midwest states with graduated systems.
Then, both proponents and opponents had more than a year to present their arguments.
There are some restrictions on campaign spending and donations under Illinois election laws. However, the regulations are rife with flaws and place no restrictions on political committees established to support or oppose ballot initiatives like the income tax proposal.
At least five different campaign committees formed by opponents of the graduated income tax raised a combined total of close to $63 million. The Coalition to Stop the Proposed Tax Hike Amendment received close to $60 million, including the $54 million from Griffin, making it by far the most well-funded group. According to state campaign donation records, the coalition received the majority of its remaining funds from other billionaires and millionaires.
Pritzker, on the other hand, founded the Vote Yes for Fairness committee and donated $58 million of his own money to the “fair tax” cause. Records show that besides Pritzker’s contributions, the committee only received one $250 donation.
Griffin launched additional offensives as well. Griffin blasted Pritzker as “a shameless master of personal tax avoidance” in an email to Citadel’s Chicago staff, according to a report in the Chicago Tribune from October 2020.
According to Forbes, the majority of Pritzker’s wealth ($3.6 billion) is held in trusts, some of which are domestic and others of which are offshore. Some, according to Pritzker, were started by his grandfather. Patriarchs of the 20th century frequently created trusts to pass wealth down through the generations without having to pay estate taxes, as ProPublica reported last year.
Pritzker has made his personal tax returns public, but he hasn’t given specifics about the trusts. The governor and his wife, MK, earned $5.1 million in personal income for 2020, according to returns released by Pritzker’s office. According to Natalie Edelstein, a spokesperson for Pritzker, the domestic trusts that benefit the governor also paid $16.3 million in Illinois taxes and $69.6 million in federal taxes in 2020.
The IRS data obtained by ProPublica provides no information on those trusts. The governor is not disclosing the trusts’ documents because he “is not the only beneficiary, so he does not have the authority to release all of the information,” Edelstein claimed in response to ProPublica’s request for more information. She claimed that the governor had donated the money received from the offshore trusts to charity rather than taking any of it personally. She merely stated that the trusts had been “established generations ago” without addressing whether they had been set up to avoid estate taxes.
At the height of the graduated income tax campaign, Illinois appeared to be inundated with both pro and con advertisements in mailboxes, online, and on the radio.
Professor of public administration at the University of Illinois Chicago David Merriman recalled the situation, saying, “You couldn’t even watch TV because it was just one ad after another.”
According to Merriman’s research, Illinois had a higher tax burden on low-income taxpayers and less revenue from income taxes than its neighboring states with graduated tax systems, including states with Republican governors. But, perhaps unsurprisingly, the advertisements largely shied away from policy debates in favor of political appeals.
One anti-tax advertisement claimed that Springfield politicians were “pushing a constitutional amendment at the worst possible time, giving them new powers to make it easier for them to raise taxes on all Illinois taxpayers.” We know that you can’t trust Springfield politicians, if there is one thing about them.
According to the state Senate bill that had already passed, 97 percent of taxpayers would pay the same or less under the governor’s proposal, according to the fair-tax campaign, which accused the wealthy of trying to deceive middle-class families.
Voters, however, weren’t persuaded. According to Merriman, the advocates of the graduated tax failed to convince voters that the amendment would be advantageous to them while federal investigations into a number of Chicago and state politicians were making headlines. 53 percent of voters rejected the initiative, while 47 percent supported it.
It demonstrated how deeply mistrustful people have for the government, he claimed.
In the Illinois governor’s race this year, the money war has persisted. The largest single political contribution in Illinois in many years, if not ever, Pritzker deposited $90 million into his own reelection fund in January. By funding their own campaigns, candidates are allowed to circumvent donation caps under state election law.
Republicans hoping to unseat Pritzker this fall received significant contributions from a number of the anti-tax funders. Darren Bailey, a right-wing state senator supported by more than $17 million Uihlein donated to his campaign and an affiliated super PAC, defeated Griffin’s hand-picked candidate in the GOP primary last week despite Griffin leading the field with $50 million in spending. Griffin was also opposed by Pritzker and the Democratic Governors Association, who spent money on advertisements criticizing Griffin’s nominee, Richard Irvin.
The weekend before the election, Donald Trump endorsed Bailey, who finished with about 58 percent of the vote. Irvin lost ground and dropped to third with 15%. Bailey attacked Pritzker as a “out-of-touch, elitist billionaire” in his victory speech on election night.
Are you feeling overburdened? Bailey yelled for his followers. They replied, “Yeah!”
By that time, Griffin had made a significant announcement that caused his state tax bill to significantly decrease.
Griffin informed Citadel staff in writing that he was relocating the company’s headquarters to Miami and that he and his family had already done so.
There is no personal income tax in Florida. Griffin will continue to pay some personal income tax in New York and Illinois because Citadel has offices there, according to experts who spoke with ProPublica. But his bill will undoubtedly drastically decrease, likely saving him tens of millions of dollars annually.
Citadel did not address whether Citadel’s decision was influenced by taxes in response to ProPublica’s queries. Instead, the spokesperson identified crime concerns as the primary motivator in their statement: “Simply put, Ken left Illinois because it was becoming anarchic there. In Chicago, senseless violence has become a way of life.”
Griffin did not mention taxes as a factor in the move in his letter to Citadel staff. As opposed to that, it waxed lyrical about how Miami “embodies the American Dream — embracing the possibilities of what can be achieved by a community working to build a future together.”
