Illinois Approves Sharp Income Tax Increase, Fourth-Highest Corporate Tax Rate

January 12, 2011

We’ve released a report today taking an updated look at how just-enacted tax increases in Illinois would have affected their ranking in our 2011 State Business Tax Climate Index. Authored by Tax Foundation Staff Economist Kail Padgitt and myself, the report is Fiscal Fact No. 256, “Illinois Approves Sharp Income Tax Increase, Fourth-Highest Corporate Tax Rate.” As enacted, the Illinois plan raises the individual income tax from 3% to 5%, a two-thirds increase, and raises the corporate income tax from 7.3% to 9.5%, a 30 percent increase. Illinois will thus have the fourth-highest state corporate income tax in the United States and the fourth-highest combined national-local corporate income tax in the industrialized world. The formerly low, one-rate individual income tax compensated for many negative aspects of the state’s tax system.

Had the plan as enacted on January 12 been in effect on July 1, 2010 (the snapshot date for the 2011 State Business Tax Climate Index), Illinois would have ranked 36th instead of 23rd. This is a fall of thirteen places, past South Carolina, Georgia, Pennsylvania, Tennessee, Alabama, Nebraska, Oklahoma, Maine, Massachusetts, New Mexico, Arizona, and Kansas.

Check out the full report here.


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