Illinois ranks as worst state for low-income earners

A WalletHub study found low-income Illinoisans pay 14% of their annual salary to sales, property and incomes taxes – more than anywhere else in the nation. The state’s middle- and high-income earners weren’t much better off.

A new study ranked Illinois as the worst state for low-income earners to live and the third-worst state for middle-income Americans.

The WalletHub report found low-income Illinoisans will pay 14% of their annual income to state sales, property and income taxes in 2024 – the most in the nation and twice as much as residents in the lowest-tax state: Alaska.

Middle-income earners will spend 12.6% of their income on state and local taxes this year. The largest proportion will go toward covering sales and excise taxes on the purchase of goods.

Even Illinois’ high-income earners will pay some of the nation’s highest tax rates. Illinois ranked as the sixth-worst state for high-income residents, costing taxpayers about 10.9% of their annual income.

A WalletHub analyst said Illinois’ poor ranking for low- and middle-income residents stems from the regressive nature of many taxes public officials rely on to balance the state budget.

“The wealthy and less fortunate are both subject to taxes, but unfortunately people who are not as well off can end up getting hit harder due to the regressive nature of many taxes,” WalletHub analyst Cassandra Hope said.

“Illinois residents with low incomes pay the greatest percentage of their income in taxes, at nearly 14%, while people in Alaska pay around half that, at nearly 7%.”

Hope said the study based these calculations on residents with an income of $25,000 for low earners and $150,000 for high earners.

Census data shows nearly 116,000 Illinoisans moved out of the state during 2022, with 97% of those residents leaving for lower-tax states.

Polling from NPR Illinois and the University of Illinois found 61% of Illinoisans thought about moving out of state in 2019. The No. 1 reason was taxes.

It’s no surprise when Illinoisans pay the highest state and local tax burden in the Midwest and the second most in the nation for property taxes. Lawmakers should look to common-sense solutions that will help the state’s most vulnerable residents succeed.

Those solutions include reducing occupational licensing restrictions, promoting affordable housing by loosening zoning, expanding workforce development pipelines and restructuring safety net programs. All those moves will put more dollars back into residents’ pockets while providing greater opportunity for social mobility.