State of Illinois, highest local tax burden in the Midwest after the second largest increase in the United States
The effective state and local tax burden in Illinois has fallen from 11.2% in 2019 to 12.9% in 2022. It is now the seventh highest in the nation.
Illinois’ effective state and local tax burden is 12.9% of the state’s gross product – the seventh highest in the nation and the highest of any Midwestern state, according to a new study released. on April 7 by the nonpartisan Tax Foundation.
Only residents of New York, Connecticut, Hawaii, Vermont, California, and New Jersey incur higher tax burdens than Illinois. Illinois residents pay higher tax rates than any other state in the Midwest, and no neighboring state has an effective state and local tax burden above 11.2%, paid by Iowans. The effective national and local average national tax burden is also 11.2%.
Residents of neighboring Michigan pay the fifth-lowest state and local tax burden at 8.6%. Those in Indiana, Kentucky and Missouri each have effective tax burdens of 9.3% and 9.6% respectively, also among the lowest rates in the country.
Not only has Illinois consistently faced the highest effective state and local tax burdens in recent years, but state and local taxes have also increased more than virtually any state since 2019.
Illinois’ state and local tax burden has increased more than 15% since 2019, behind only Connecticut. In 2019, Illinois’ burden was estimated at 11.2% — the 13th highest in the nation — but over the past three years that figure has risen to 12.9%, the seventh highest in the nation. The national average rose only 5.7% during this period, which means that tax burdens grew almost three times faster in Illinois.
Illinois’ poor state and local tax burden ranking is not because Illinois pays large sums in taxes on out-of-state vacations or second homes, but rather because of the high tax rates in the state.
To name a few: Illinois property taxes — often the heaviest tax burden for Illinois — are the second highest in the nation; gasoline taxes are also the second highest in the country; the combined state and average local sales tax rate is the eighth highest in the nation. Meanwhile, Illinois income tax suffered the largest permanent rate hike in state history in 2017.
Illinois’ hostile fiscal environment has played a major role in the state’s emigration crisis which has been the sole driver of 9 consecutive years of population decline, including the largest emigration and population decline ever recorded in 2021. Illinois people have always chosen to leave the state for better housing and employment opportunities, both of which have been made worse by poor public policy in Illinois. Nearly half of Illinoisans have thought about moving, and they say taxes are their main reason. Population decline is also contributing to the decline in the state’s economic prospects.
Worse still, lawmakers put Amendment 1 on the Nov. 8 ballot. Amendment 1 would amend the Illinois Constitution to grant Illinois unions more extreme powers than they have in any other state, including the ability to negotiate on virtually unlimited matters, the ability to overriding state law through their contracts and a guarantee that taxpayers and lawmakers would have a hard time reversing its course.
If Amendment 1 passes, Illinois’ $317 billion pension debt will continue to swell as state and local taxes, which are already among the highest in the nation, rise in an attempt to keep pace. Spending on vital programs will continue to decline. Illinois’ housing and labor markets are already hurting as high taxes and reduced services make it difficult to find a job and live in the state.
Illinois needs reform that will reduce state cost drivers and provide services to residents in exchange for their tax dollars. Amendment 1 ensures that these challenges will increase.