Why Chicago Teachers Union’s $7.3B tax hike will hurt all of Illinois

The Illinois Revenue Alliance, a group which includes the Chicago Teachers Union, has released a proposal to impose nine tax increases and hike statewide taxes by $7.3 billion annually. Some of CTU’s ideas are likely illegal and tax all Illinoisans for the union’s excesses.

The Chicago Teachers Union has released a new proposal that calls for nine new tax hikes that would increase statewide taxes by $7.3 billion.

But rather than fixing government finances, the tax hikes would only deepen Illinois’ economic challenges by chasing away jobs, capital and families. Here is a breakdown of the taxes and the potential harms.

Tax on digital ads: $725 million

The plan to impose a 10% tax on digital advertising may sound like it targets “Big Tech,” but in practice the costs would be passed to small businesses who rely on these platforms to reach customers. Small businesses that rely on large advertising platforms such as Google, Meta or Amazon would face increased costs from a digital advertising tax: hitting small businesses with a tax hike, not the tech giants vilified by the CTU.

It’s also legally questionable. Maryland’s similar law is already tied up in lawsuits.

Worldwide combined reporting: $1.2 billion

One proposal would require multinational companies to report and pay tax on their global income, including profits made entirely overseas. This complex reporting mandate would be nearly impossible to enforce and could discourage firms from locating or expanding in Illinois.

Unrealized capital gains: $840 million

Perhaps the most egregious idea is a so-called “billionaire wealth tax” that applies state income tax to unrealized capital gains – essentially taxing people for money they haven’t actually received. Aside from being unconstitutional under Illinois’ flat tax requirement, it would likely trigger a mass exodus of wealthy residents and investors, shrinking the very tax base lawmakers want to expand.

Capital gains surcharge: $1.7 billion

Another plan increases Illinois’ tax on capital gains to 7% – one of the highest in the nation – for those earning more than $250,000 per year. Illinoisans already pay the flat tax rate of 4.95% on capital income in Illinois. Increasing this tax would not only create an unequal tax treatment but may even be illegal under the state’s constitution. Additionally, this would punish investment and entrepreneurship at a time when Illinois needs more capital flowing into businesses, not less.

Increase corporate income tax: $830 million

Illinois already has the third-highest corporate income tax in the nation. Increasing the tax from 7% to 7.92% would further damage Illinois’ economic competitiveness, especially when neighboring states offer more favorable tax climates and the trend is to decrease these taxes.

Taxing carried interest: $1.5 billion

The proposal to impose a 17% surcharge on carried interest – the performance fees earned by hedge fund and private equity managers – would be both economically and legally dubious. It’s likely unconstitutional under Illinois’ flat tax requirement, which mandates a single income tax rate for all earners. Carried interest is already taxed as income in Illinois; creating a separate rate via a surcharge would almost certainly invite litigation. It’s also easy to avoid. Fund managers could relocate to other states or restructure their compensation to fall outside the carried interest classification. That would reduce Illinois’ tax base while bringing in little to no new revenue.

End corporate tax exemptions and credits: $175 million

The plan to eliminate remaining corporate “loopholes” includes cutting tax incentives for manufacturing equipment, construction jobs and biodiesel fuel. But these incentives exist to support job creation and sustainability goals. Removing them without alternatives would raise costs for businesses in key sectors and undermine Illinois’ efforts to grow its manufacturing base and invest in green energy. The Pritzker Administration has repeatedly toutied its support for these efforts, making them politically costly.

Expand estate tax: $150 million

The plan calls to lower Illinois’ estate tax exemption from $4 million to $2 million. It could devastate family-owned businesses, farms and the middle class’ ability to build wealth. Illinois is one of only 12 states that still imposes an estate tax. Lowering the exemption threshold would make it one of the most aggressive in the nation, potentially forcing heirs to sell land, equipment or stock just to cover the tax bill.

The estate tax is economically harmful, driving wealthy individuals and family businesses out of Illinois to avoid high tax burdens. It disproportionately hurts heirs with assets such as farms or small businesses, often forcing asset sales just to pay the tax. Despite these costs, it generates minimal revenue and creates perverse incentives that discourage saving and investment. Wealthier families often avoid it through sophisticated planning, while middle-class families bear the brunt. Instead of hiking this inefficient tax, Illinois should focus on pro-growth policies that attract residents and investment, not push them away with punitive, counterproductive taxation.

Tax foreign income: $200 million

The proposal to tax sheltered corporate income through Global Intangible Low-Taxed Income would hurt Illinois’ economy while producing little reliable revenue. It effectively double-taxes multinational companies on profits already taxed federally. It imposes complex compliance burdens at the state level. States often lack the enforcement capacity to audit intricate global financial structures, making the tax both inefficient and unenforceable. The policy would discourage investment, pushing companies to relocate or restructure operations outside Illinois. Rather than encouraging economic growth, this tax targets legal international business practices and would make Illinois even less competitive in attracting and retaining major employers.

Taxes to hurt Illinois: $7.3 billion

The Chicago Teachers Union is calling for massive statewide tax hikes in part because their new contract will push Chicago Public Schools finances to a $1 billion fiscal cliff. Lawmakers should reject these proposals.

Instead of punishing job creators and investors with complex, legally dubious and economically harmful taxes, lawmakers should focus on reforming Illinois’ broken spending habits. Their work needs to focus on making the state a place where families and businesses want to stay and grow.