Over 22,000 Illinois small businesses could face over 50% tax rate under proposed ‘millionaires tax’
Illinois lost more of its income to outmigration than any other state in 2023

CHICAGO (April 22, 2026) — The Illinois General Assembly could vote as soon as today on a massive tax hike on small businesses, the state’s primary job creators.

House Joint Resolution Constitutional Amendment 21 would add a 3% income tax on earnings above $1 million, which includes pass-through income of owners of S-corporations and partnerships. If passed by the House, the bill would need Senate approval by May 3 to appear on the Nov. 3 ballot.

If enacted, the state would hike taxes on 22,020 Illinois small businesses, according to new research from the Illinois Policy Institute, pushing their combined state and federal tax burden to as high as 50.3% on top-end income. Under the plan, the top marginal state income tax rate would jump from 4.95% to 7.95% — a 61% increase.

“This isn’t a tax on the rich, it is a direct hit on Illinois’ small business community, which drives job creation across the state,” said Bryce Hill, director of fiscal and economic analysis for the Illinois Policy Institute. “Piling on higher taxes will make it harder for entrepreneurs to grow, hire and raise wages. It will make it harder to find work in the state.”

Small businesses with under 50 employees have been the only firms to add jobs since 2020.

Research shows higher marginal tax rates are associated with reduced hiring and lower wages; it also shows a strong connection between high taxes on income and high instances of outmigration.

Illinois’ income loss from net outmigration are the worst in the country — more than $11 for every $1,000 previously earned in the state in 2023. This was driven primarily by those making over $200,000, who left at twice the rate of any other group in 2023, about 12 residents per 1,000.

After passing a millionaires tax in 2022, Massachusetts has now seen a net loss of $4 billion in adjusted gross income due to net outmigration.

“Proposals such as this one risk making everything worse in the state — we won’t be able to bring in as many businesses, we’ll see residents leaving and we can’t count on what lawmakers say it’ll bring in revenue-wise,” Hill said. “The state must be focused on growth — not driving people and businesses away.”

To read more about Illinois’ millionaire tax proposal visit, illin.is/small-biz-tax.

For bookings or interviews, contact media@illinoispolicy.org or (312) 607-4977.