In Fiscal Year (FY) 2013, Illinois collected $69.8 billion in state and local taxes. While this is an impressive sum of money, it tells us little about whether or not the average Illinois taxpayer can afford this level of taxation.
As shown in Chart 1, Illinois’s state and local tax burden (tax collections divided by personal income) was the fifteenth highest in the nation for FY 2013 at 11.7 percent—this is 13 percent above the national average of 10.3 percent. As shown in Chart 2, Illinois’s tax burden has grown significantly over time by 93 percent to 11.7 percent in FY 2013 from 6 percent in FY 1950.
Illinois’s higher-than-average tax burden is driven by a high property tax burden (4.4 percent, 8th highest), individual income tax burden (3.4 percent, 6th highest), and corporate income tax burden (0.75 percent, 5th highest). On the other hand, other taxes are lower than average including the sales tax (1.6 percent, 41st highest), and all other taxes (1.5 percent, 43rd highest).
It should also be noted that the individual income tax burden is at its highest level ever thanks to a “temporary” 66 percent increase in the flat, statutory income tax rate to 5 percent from 3 percent in 2011. Thanks to the tax rate increase, Illinois taxpayers have endured a 112 percent increase in their individual income tax burden to 3.4 percent in 2013 from 1.6 percent in 2010.
As such, it is not a surprise that Illinois is experiencing a surge of out-migration of both people and income who are escaping the high tax burden. In fact, I recently co-authored a study for Illinois Policy Institute, called “Policy Lessons From Illinois’ Exodus of People and Money,” that found:
Illinois lost people and income in 2010, the most recent year of IRS data. Illinois’ net loss was 49,142 people and nearly $2 billion in annual income. The largest net loss of people was to Texas. The largest net loss of income was to Florida.
Illinois has lost people and income in every year from 1995-2010. The state sustained a net loss of 855,196 people and $35.4 billion in annual income from 1995 through 2010. The top states that gained people from Illinois during this time period were Florida, Indiana, Wisconsin, Texas and Arizona.
Of course, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in Illinois—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
The Illinois counties with the highest local government tax burden include: Grundy County, IL (8 percent), Kane County, IL (7.9 percent), and DeKalb County, IL (6.8 percent). The Illinois counties with the lowest local government tax burden include: Pulaski County, IL (1.1 percent), Hardin County, IL (1.2 percent), and Hamilton County, IL (1.6 percent).
J. Scott Moody has nearly 20 years experience as a public policy economist with a specialty in tax policy and has over 180 publications. He has worked for numerous national and state-based think tanks such as the American Conservative Union Foundation, Federalism In Action, Tax Foundation, Heritage Foundation, and The Maine Heritage Policy Center.