Survey: Illinois state, local taxes are highest in nation
Illinois households pay nearly $9,500 on average in state and local taxes, which at 15% of their income is the nation’s highest. WalletHub finds gasoline taxes pushed Illinois to No. 1.
Illinois households spend 15% of their income on state and local taxes, according to a new analysis by personal finance website WalletHub.
The cost is $9,488 in Illinois state and local taxes applied to the median U.S. household income of $63,218. Illinois also ranked as having the second-highest property taxes and third-highest gas taxes.
Analyst Jill Gonzalez said it was those gas taxes, which the state doubled in 2019, that pushed Illinois to the top tax spot.
“I think so because now Illinois has the third-highest gas taxes in the country, and that’s five times higher than Arizona, or New Mexico or Mississippi,” Gonzalez told The Center Square.
Illinois in 2019 doubled the state gasoline tax, but also authorized certain counties near Chicago to increase or establish their own gas taxes. Lake County was the latest to use that law and just hiked taxes by 4 cents per gallon, effective July 1.
July 1 is also when the state’s gasoline tax is set to automatically increase by as much as a penny a gallon. It is currently 38.7 cents per gallon after initially doubling from 19 cents a gallon in 2019.
WalletHub’s study ranked all 50 states based on four types of taxation including state and local taxes, income taxes, real estate taxes, sales and excise taxes. It found the median Illinois household pays almost $5,000 annually in real estate taxes, which ranked it No. 2. The state has the 11th highest income taxes, eating another $1,800 from families each year.
Analysts pointed out that having one particularly low tax, such as income or real estate taxes, isn’t enough to save families from feeling the pain in their wallets.
WalletHub issued another recent analysis showing the best states to be rich or poor from a tax perspective. Illinois did not fare well in that study, either.
Illinois ranked second-worst place to be either a low-income of middle-income household, thanks to high tax rates. A low-income household at $25,000 loses over 13% of its income to Illinois taxes. A middle-income household loses nearly 12% of its $50,000 income.
Remember the rich that Gov. J.B. Pritzker proposed taxing with his “fair tax” until voters soundly defeated it Nov. 3? Illinois ranks as the third-worst state for high-income households, taking 11% of incomes of $150,000.
As the Illinois economy struggles to recover from the COVID-19 economic downturn and continues posting record unemployment, Pritzker is again seeking nine new taxes that would take nearly $1 billion by targeting employers and job creation measures.
But there is a better way than making the most-taxed households in the nation suffer more: the just-passed federal stimulus package includes $7.55 billion for Illinois state government that could give Illinois the breathing room to enact fiscal reforms. Leading those reforms is a constitutional amendment to control the future growth of the state’s five public pension systems.
State leaders can keep doing what they have been doing and watch WalletHub again rank Illinois atop the taxation rankings in 2022, or they can decide this is the moment for change. Change will solidify state finances, protect services to the state’s students and most vulnerable residents – and give taxpayers a break.