Tax analyst: Illinoisans crushed under weight of sales, income, property taxes
Illinoisans pay more in total taxes than anyone else in the nation, so any thoughts about adding to that burden need to be forgotten, a tax analyst argued recently.
“Any way you measure it, Illinois governments already collect more than enough money from taxpayers,” Craig Lesner wrote for the Illinois Policy Institute. “Illinoisans pay the highest property taxes in the nation, and when total state and local taxes are tallied up, Illinoisans face the highest overall tax burden in the nation. Illinoisans can’t afford to pay more taxes.”
Lesner is the budget and tax research director of the institute.
According to the Governor’s Office of Management and Budget, 72 percent of lllinois' expected revenue of $32.4 billion for this fiscal year will come from income and sales taxes, which account for 47 percent and 25 percent of the total, respectively.
The state garners approximately $3.8 billion, or 12 percent of its revenue, from taxes on cigarettes, liquor and insurance; and $3.2 billion, or 10 percent, from federal reimbursements, which primarily go toward funding the state’s Medicaid programs.
Public utility taxes, levied against electricity, telecommunications and natural gas companies, bring in $899 million, and taxes on riverboat gambling and the net profit of the state’s lottery amount to $990 million. Both of those round to approximately 3 percent of revenue.
In comparison, sales taxes net $8.2 billion and income taxes bring in $15.4 billion.
Lesner referred to a recent report by WalletHub that looked at state and local taxes of every state to determine the effective tax rate for median households. Illinois ranked last, behind every state and Washington, D.C., with an effective state and local tax rate of 14.76 percent — 37.66 percent higher than the national average.
For median-income U.S. households ($54,286), Illinois state and local tax rates would take $8,011. The median Illinois household would pay $8,162. Illinois’ prospects were improved when WalletHub adjusted the rankings based on the Cost of Living Index, moving up the state to the 43rd position.
According to WalletHub’s data, the effective real estate tax rate for Illinois residents of 7.56 percent is nearly the highest in the country, with only New Jersey being higher. The state’s effective income and sales tax rates are slightly worse than average, earning Illinois the 20th and 27th positions in those rankings, respectively.
State taxes have led to $70 billion in revenue over what the state would have collected between 2003 and 2016 had revenue increased only to account for inflation and population growth, according to data presented by Lesner.
“But politicians didn’t use that excess money to pay down pensions or debt," Lesner wrote. "Instead, they used it to prop up higher spending on government-worker benefits."
A separate Illinois Policy report found that approximately $2.7 billion in tax revenue goes toward paying for health care benefits for state workers.
Even with the high tax burden on its residents, Illinois is still not bringing in enough revenue to account for its spending. For this fiscal year, the Governor’s Office of Management and Budget expects spending to reach $38.1 billion — for a budget deficit of nearly $6 billion.
“Some politicians are calling for another income tax hike,” Lesner wrote. “But as the numbers show, Illinoisans are already shelling out a pretty penny – and the General Assembly hasn’t proved itself capable of managing the money.”