Policy Documents

Illinois’ High-Tax Problem

Ted Dabrowski –
July 18, 2013

In 2011, Illinois Gov. Pat Quinn and the Illinois General Assembly used a lame duck session to pass a 67 percent personal income tax increase and a 46 percent corporate income tax rate increase. The governor promised the tax hike would help pay off the state’s massive liabilities and restore economic prosperity.

But the promises Quinn made regarding the tax hike have not come true. Since the hike, the state’s economy has remained stagnant and its fiscal reality has worsened. In fact, Illinois has had its credit rating downgraded several times since the tax hike, the unfunded pension liability has continued to increase and the state’s unpaid bills still amount to more than $6 billion.

Now some Illinois lawmakers want to make things worse. Many in Springfield are looking to renege on their promises to taxpayers by proposing to extend the 2011 income tax hike indefinitely, though the tax hike is set to sunset to 3.75 percent from 5 percent in 2015.

Even worse, some politicians want to burden the state’s economy and taxpayers further by instituting a progressive income tax.

It appears Illinois’ politicians have learned nothing from the failures of the 2011 tax hike.

Meanwhile, many of Illinois’ neighbors are generally reining in spending, lowering tax rates and solving long-term deficit problems. Some neighboring states have been proactive and reduced their tax burdens. Indiana is lowering its corporate tax rate from 8.5 percent to 6.5 percent. Other states, such as Iowa and Missouri, gained a competitive edge on tax-hiking Illinois by simply letting their current rates stand.

Illinois currently has a total tax burden in the top fourth of all states. While data for 2011 state and local tax burdens are not yet available, one thing is clear: Illinois isn’t just a high-tax state; it is an even higher-tax state than it was before.