Research & Commentary: Progressive Income Tax Would Doom Illinois

Published May 7, 2019

For decades, Illinois lawmakers have misspent state funds like drunken sailors. Even worse, they have increased taxes to the point that the Prairie State is now on the precipice of economic Armageddon.

Altogether, Illinois legislators have created billions in unfunded liabilities while imposing the highest tax burden in the United States. Currently, the combined state and local tax rate in Illinois ranks dead last in severity, according to a March report by WalletHub. The average Illinois household earning the median U.S. income pays a whopping 14.9 percent in state and local taxes alone.

As a result of Illinois’ decades-long spending and taxing binge, the state is experiencing an exodus that will continue to worsen its shaky economic situation as time marches on. Astonishingly, every 4.6 minutes, another resident flees the Prairie State for greener pastures.

Unfortunately, Illinois lawmakers are on the verge of making the state’s dire fiscal situation even worse by pushing for a progressive income tax, which would likely increase the rate at which residents are abandoning the state.

At present, the Illinois Constitution requires a flat income tax. Changing the current tax structure to a progressive system would require a state constitutional amendment approved by a voter referendum and three-fifths of the state legislature.

Despite liberals’ talking points to the contrary, the flat tax is beneficial for several reasons. First and foremost, a flat tax does not disproportionately penalize the most productive residents with higher tax rates. Second, a flat tax is fair to all. Third, a flat tax boosts economic performance by eliminating the tax bias against savings and investments.

Although supporters of the progressive “fair tax” claim it will solve the Prairie State’s budget crisis, this could not be further from the truth. Illinois does not have a tax revenue problem. Rather, Illinois has a massive spending problem. In fact, since the Great Recession in 2008, Illinois’ tax revenues have increased faster than all Midwestern states, except Minnesota, according to a recent study from Pew Charitable Trusts.

Imposing a progressive income tax is likely to have long-term negative effects on all Illinois residents by further damaging the state’s business climate and eliminating more jobs. Illinois is already an economic basket case: its population is decreasing at an alarming rate, unemployment remains high, and future unfunded liabilities keep growing. Simply put, increasing taxes on Illinois residents is the wrong path, and will only compound existing issues. Illinois legislators should focus on making the state a more attractive place for businesses and residents by restraining spending, lowering taxes, and reducing unnecessary regulations.

Instead of focusing only on the tax revenue side of the equation, lawmakers should focus on fixing the structural issues on the spending side. This is where the real problem lies and where the long-term fiscal health of the state can be shored up.

The following literature examines progressive taxation from multiple perspectives.

7 Reasons to Reject a Progressive Income Tax in Illinois
In this article, Bryce Hill of the Illinois Policy Institute outlines seven reasons Illinois should protect its flat income tax structure.

Ten Principles of State Fiscal Policy
The Heartland Institute provides policymakers and civic and business leaders a highly condensed, easy-to-read guide to state fiscal policy principles. The principles range from “Above all else: Keep taxes low” to “Protect state employees from politics.”

Progressive Income Tax Money Grab Disguised as Tax Reform
Ted Dabrowski of the Illinois Policy Institute dispels several myths behind progressive taxes. Dabrowski argues a progressive income tax would raise taxes on middle-income Illinoisans and destroy needed jobs for poor and working families.

Moving to a Progressive Income Tax Would Increase Taxes on the Majority of Illinois Employers
Elizabeth Malm of the Tax Foundation examines the effect a progressive tax would have on Illinois’ businesses.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the Budget & Tax News website, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state, or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Lennie Jarratt, Heartland’s state government relations manager, at [email protected] or 312/377-4000.