Chicago Teachers Union pushes $7.3B in taxes on Illinoisans
The Chicago Teachers Union and its partners are pushing nine new or higher taxes that could end up costing Illinoisans $7.3 billion more starting July 1. Their scheme to fill a proposed state budget deficit is likely to backfire and shrink the tax base.
Illinoisans could pay over $7.3 billion more in taxes next fiscal year if the Chicago Teachers Union and its partners get nine new or higher taxes on individuals’ assets, businesses and estates.
The group misses two important points: Illinoisans are already fed up with high taxes and are moving away as a result; and the problem is not a lack of taxes, but rather elected leaders spending like they have unlimited bags of cash.
The nine tax hikes proposed by the Illinois Revenue Alliance, a coalition of the CTU, labor unions, other organizations and advocacy groups would add significant costs for Illinois taxpayers and corporations.
The alliance’s push for taxes, starting July 1 with the fiscal year 2026 state budget, includes:
- $725 million: tax on digital advertising
- $1.2 billion: corporate tax worldwide combined reporting
- $200 million: tax corporate offshore sheltered income
- $1.5 billion: close the carried interest loophole
- $840 million: billionaire wealth tax
- $1.7 billion: excise tax on capital gains
- $830 million: raise corporate income tax
- $175 million: close corporate tax loopholes
- $150 million: reform the estate tax
The alliance argues the over $7.3 billion in tax hikes are necessary to cover the new state budget shortfall and help expand funding for schools, immigrant services, direct cash assistance and affordable housing.
That “shortfall” is a matter of spending growth – Gov. J.B. Pritzker is setting another state record for spending with a $55.2 billion proposal that is $16.7 billion more than the state spent when he took office.
Also, the alliance’s ideas could end up costing the state by driving more residents and businesses out of Illinois and toward lower-cost locales. Here is a look at some of those proposed tax hikes.
Raise corporate income tax
Proposal: Raise the Illinois corporate income tax rate from 7% to 7.92%, which is the maximum increase allowed under the Illinois Constitution. The tax is limited to eight-fifths of the personal income tax.
What to know: Illinois already levies the third-highest state corporate income tax rate in the U.S. Illinois’ flat corporate income tax rate tallies 9.5% and includes a 7% business income tax rate and a 2.5% Personal Property Replacement Tax for corporations. Only Minnesota and New Jersey tax corporations at higher rates.
Excise tax on capital gains
Proposal: Impose a tax of 7% on long-term capital gains on assets other than real estate over $250,000 in a given tax year.
What to know: Capital gains in Illinois are taxed at 4.95%, the same single rate as an individual’s income. There is currently no distinction between short-term and long-term capital gains at the state level. Illinois’ current long-term capital gains tax ranks 25th in the nation.
Reform the estate tax
Proposal: Reduce the state estate tax exemption to $2 million.
What to know: Illinois’ current state estate tax threshold is $4 million, meaning if you die and your total estate is valued at above $4 million, it will be taxed at a progressive rate before the money can be dispersed to your heirs. This is problematic for family farms as well as family businesses, threatening their ability to continue. The top Illinois tax rate is 16%. The federal estate tax has a much higher exemption of $13.99 million in 2025.
Shrinking the tax base
Surveys show high taxes were the No. 1 reason why most Illinoisans considered leaving the state. Polling from NPR Illinois and the University of Illinois found 61% of Illinoisans thought about moving out of state in 2019, and the No. 1 reason was taxes.
Similar surveys conducted by the Paul Simon Public Policy Institute in 2016 and Echelon Insights in 2023 also found high taxes were the single biggest reason Illinoisans wanted to move out of state.
Illinois managed to lose a resident to another state every 9 minutes and 21 seconds between July 2023 and June 2024. Since 2020, the state has lost a total of 420,678 residents to domestic outmigration, according to census estimates.
Illinois has also lost major businesses as most states – including Illinois’ neighbors – decided to lower corporate income taxes. Major companies such as Citadel, Tyson, Caterpillar and Boeing all fled Illinois as the state’s business climate ranking fell from 29th in 2018 to 37th in 2024.
Instead of giving residents and businesses more reasons to leave Illinois by imposing over $7.3 billion in extra taxes and shrinking the state tax base so that higher burden is carried by fewer taxpayers, lawmakers should incentivize more taxpayers to stay or move to Illinois. Limiting future state spending and providing substantive tax relief would create that incentive.