Download Illinois Illustrated: A Visual Guide to Taxes & the Economy (PDF)
Illinois is at a turning point. It currently faces a large volume of unpaid bills, a multibillion dollar budgetary shortfall, and the partial sunset of taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. increases from 2011. Between all of this and the state’s failed attempt at pension reform, Illinois is in need of policy solutions. Budget, revenue, and structural proposals are all currently on the table, but tax reform needs to be part of the discussion.
However, for taxpayers and legislators alike, understanding the problems embedded in the state’s tax code is a dizzying task. There are many types of taxes levied on many different activities, and keeping track of each tax in the context of the overall economy is difficult.
In order to help inform the conversation about Illinois’ fiscal future, the Tax Foundation has released a new study in partnership with the Taxpayers’ Federation of Illinois that offers a broader perspective of Illinois’ taxes and helps readers visualize some of the lesser-known aspects of its business tax environment. Illinois Illustrated: A Visual Guide to Taxes & the Economy provides detailed illustrations of each of Illinois’ major tax types—individual income taxes, business taxes, sales and excise taxes, and property taxA property tax is primarily levied on immovable property like land and buildings, as well as on tangible personal property that is movable, like vehicles and equipment. Property taxes are the single largest source of state and local revenue in the U.S. and help fund schools, roads, police, and other services. es—to help make the complicated task of understanding the state’s tax code manageable.
Here are just a few examples of the more than 40 key findings:
- Illinois’ economy is moving away from goods and toward services.
- Illinois’ tax burden ranks higher than most other states.
- Illinois’ individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. rate has fluctuated over time.
- Businesses’ effective tax rates vary widely by industry and age of firm.
- Illinois has the highest combined average sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. rate among its neighbors, but the sales tax applies to less and less of the state’s economy over time.
- The value of Illinois’ gas taxA gas tax is commonly used to describe the variety of taxes levied on gasoline at both the federal and state levels, to provide funds for highway repair and maintenance, as well as for other government infrastructure projects. These taxes are levied in a few ways, including per-gallon excise taxes, excise taxes imposed on wholesalers, and general sales taxes that apply to the purchase of gasoline. has declined over time.
- Illinois had 5,976 different taxing districts in 2012.