7/30/2019 Policy Point: Illinois' high-tax problem

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Illinois high-tax problemby Ted Dabrowski, Vice President of Policy,andJohn H. Klingner, Public Policy Research Assistant

The problemIn 2010, the Illinois Policy Institute reported that Illinois is a high-tax state with a tax burden in the top third oall states. Te Institute cautioned that any tax increase would damage the states economic competitiveness. IllinoisGov. Pat Quinn and the Illinois General Assembly ignored numerous warnings and used a lame duck session in2011 to pass a 67 percent personal income tax rate increase and a 47 percent corporate income tax rate increase.

As expected, the tax increases ailed to fx Illinois fscal and economic problems. Illinois still has $9 billion inunpaid bills, the lowest credit rating in the nation and a political class that has stalled on passing wholesale fscaand pension reorms. All these problems, along with the states unattractive tax code, contribute to one residentmoving out o the state every 10 minutes.

While politicians in Illinois were raising tax rates, leaders in other states were reining in spending, lowering taxrates and solving long-term defcit problems. Data or 2011 state and local tax burdens is not yet available, but onething is clear: Illinois isnt just a high-tax state; it is an even higher-tax state than it was beore.

The solutionIllinois can oster a more competitive business climate by enacting comprehensive tax reorm, including repealingthe 2011 income tax increases. Te state should also lower the rates o sales, property and excise taxes, and rejectany attempts to adopt higher tax rates or progressive tax rate structures. Eventually, Illinois should abolish itspersonal and corporate income taxes entirely as part o a undamental tax-system restructuring.

Why it works

Illinois tax code does not operate in a vacuum. Entrepreneurs, investors, workers, consumers and taxpayers, bothinside and outside the state, constantly compare and contrast Illinois with other states in the Midwest and acrossthe nation. Because o Illinois high tax rates, the state does not compare avorably to others. Lawmakers shouldbe ocusing on creating a business climate that entices entrepreneurs to set up shop in Illinois. One good place tostart is by creating a competitive tax structure.

Repealing the 2011 tax hikes would restore economic competitiveness to Illinois. It would also orce Quinn and theLegislature to ocus on reorming state programs and encourage a pro-growth economic environment. In the longterm, repealing the tax hike would help Illinois achieve the goal o going rom worst to frst among its neighborsin economic growth, job creation and competitiveness.

Illinois tax highlights National rank (1 is worst)

State and local tax burden per capita 9

Combined state and local sales tax rates 10

Median property taxes rate paid on homes 7

State gasoline tax rates per gallon 7

Combined single-day travel taxes in Chicago 1

Corporate income tax compared to OECD countries 4

illinoispolicy.org

http://illinoispolicy.org/http://illinoispolicy.org/