Illinois Considers Sharp Income Tax Increase, Highest Corporate Tax Rate
January 7, 2011
We’ve released a new report looking at how a tax plan in Illinois would affect their ranking in our State Business Tax Climate Index. Authored by Tax Foundation Staff Economist Kail Padgitt and myself, the report is Fiscal Fact No. 255, “Illinois Considers Sharp Income Tax Increase, Highest Corporate Tax Rate.”
On January 6, Illinois Senate President John Cullerton (D) announced a legislative deal to raise individual income, corporate income, and cigarette excise taxes. Under the plan:
- Illinois’s one-rate individual income tax will rise from 3% to 5.25%, a 75 percent increase.
- The corporate income tax will rise from 7.3% to 10.9%, a 49 percent increase and becoming the highest state corporate income tax in the United States and the highest combined national-local corporate income tax in the industrialized world.
The plan would severely impact Illinois’s attractiveness to business and individuals. If the plan announced on January 6 had been in place on July 1, 2010 (the snapshot date for the 2011 State Business Tax Climate Index), Illinois would have ranked 35th instead of 23rd. This is a fall of twelve places, past South Carolina, Georgia, Pennsylvania, Tennessee, Alabama, Nebraska, Oklahoma, Maine, Massachusetts, New Mexico, and Arizona.
On the individual income tax sub-index, Illinois would have ranked 15th instead of 9th, a drop of six places. On the corporate income tax sub-index, Illinois would have ranked 46th instead of 27th, a drop of 19 places.
Check out the full report, including a PDF version, here.
Also be sure to see our commentary earlier this week on Illinois adopting a click-through nexus (“Amazon tax“), currently before Governor Quinn.