Premium Cigar Taxes by State, 2024
Over 500 million premium cigars were sold in the United States in 2023. With each sale comes a complex tax landscape.
4 min readIllinois‘s tax system ranks 37th overall on the 2025 State Tax Competitiveness Index. Illinois performs well on the individual income tax component due to its single-rate individual income tax, which is prescribed by the state constitution, as well as its inflation indexing of its personal exemption. However, on each of the other components, Illinois ranks in the bottom third of states due to high rates and relatively nonneutral tax structures.
Notably, Illinois levies high income tax rates on businesses, in large part due to its personal property replacement tax (PPRT), which imposes an additional rate of 2.5 percent on corporations and 1.5 percent on certain pass-through businesses above the base corporate and individual income tax rates, respectively. As a result, Illinois’ corporate income tax rate is among the highest in the country at 9.5 percent, and its 6.45 percent rate on partnerships, S corporations, and trusts is also on the high side regionally and nationally. While the PPRT hurts Illinois’ income tax component scores, Illinois’ decision to replace its tangible personal property (TPP) tax means Illinois scores better on the property tax component than it would if it continued to tax TPP. Illinois’ corporate component score is also hurt by the state’s lack of bonus depreciation allowance under IRC Section 168(k).
Illinois’ sales and property tax rates are also high, and the estate tax and franchise tax hinder Illinois’ property tax base score. Illinois is among the states that caps the maximum capital stock tax liability a business may owe in a given year, but in the wake of the pandemic, lawmakers paused—and have yet to resume—a phased elimination of the tax. Additionally, Illinois is an extreme outlier in its decision to impose a temporary cap on the amount of net operating loss (NOL) carryforwards a business can claim in a given year. Lawmakers could improve the state’s tax climate by eliminating the cap on NOLs and completing the repeal of the capital stock tax.
Finally, Illinois’ unemployment insurance (UI) tax structure also has substantial room for improvement. Currently, it is plagued by high rates, a wage base that is nearly double the federal wage base, a solvency tax, and a long experience rating qualifying period, among other shortcomings.
Category | Rank | Rank Change | Score |
---|---|---|---|
Overall | 37 | 1 | 4.77 |
Corporate Taxes | 42 | 0 | 4.58 |
Individual Income Taxes | 13 | -1 | 5.81 |
Sales Taxes | 38 | 3 | 4.18 |
Property Taxes | 41 | -1 | 4.14 |
Unemployment Insurance Taxes | 43 | 0 | 4.20 |
Over 500 million premium cigars were sold in the United States in 2023. With each sale comes a complex tax landscape.
4 min readPolicymakers can and should address taxpayers’ legitimate grievances about out-of-control property tax bills, but they should do so without upending a system of taxation that is more efficient, fair, and pro-growth, and better suited to municipal finance, than any of the alternatives.
39 min readThe State Tax Competitiveness Index enables policymakers, taxpayers, and business leaders to gauge how their states’ tax systems compare. While there are many ways to show how much state governments collect in taxes, the Index evaluates how well states structure their tax systems and provides a road map for improvement.
115 min read