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items tagged with income taxes

Illinois’ Taxes Not Highest in Midwest
Written By: Jeff Ignatius
Section: Commentary/Politics

Category: Letters to the Editor

2015-10-23 15:03:42

Which state has the highest taxes in the Midwest? Not Illinois, that’s for sure.

The Illinois Policy Institute is claiming otherwise, citing “new research.” But that research was actually based on tax collections from Fiscal Year 2013, when the Illinois state income-tax rate was 5 percent. Today – in Fiscal Year 2016, more than two years later – the state income tax rate has dropped to 3.75 percent. So if you look at tax collections in the first six months of this year, under the new rate, Illinois’ state tax collections come out to $1,597 per person – more than $60 lower than Wisconsin’s $1,661. That’s just a fact.

Beyond that basic inaccuracy, that letter simply ignored some fundamental facts about state taxes – the first being that comparing state tax burdens is like trying to compare apples and mashed potatoes.

Take Indiana. Its income-tax rate is a flat 3.3 percent – which looks pretty good next to Illinois, right? But in Indiana, almost every county imposes its own income tax – which can range up to almost 3 percent, for a total income tax rate of 6.3 percent. That’s a whopping 68 percent higher than Illinois!

And while it’s true that people in Illinois pay more in income taxes, per person, than people in Missouri, there’s a very good reason for that: We make more money. The average per-capita income in Illinois is $29,666 – above the national average, and substantially higher than the Missouri per-capita income of $25,649. So if you want to move to Missouri and pay less, remember that’s because you’re likely to make less.

Then there’s the huge issue of comparing Illinois’ regressive flat income-tax rate with our neighboring states’ progressive rates. In Wisconsin, people in the highest income bracket pay a top rate of 7.65 percent. Iowans pay almost 9 percent on taxable income over $68,000. And people in Minnesota pay a hefty 9.85 percent on taxable income of $154,951 and above.

Here’s the real point: When you start cherry-picking statistics on state tax rates, you can prove just about anything you want. The real task is figuring out the best, fairest way for a state government to raise the revenues necessary to pay for the services that its people demand. And you can’t develop smart, effective tax policy based on a misleading, simplistic, and out-of-date chart.

But if you could, I’d choose one from the Tax Foundation (that same place the Illinois Policy Institute cited) that ranked the combined state and local tax burden in every state. Illinois comes in at number 13 – compared with Wisconsin, which had the fifth-highest tax burden in the nation.

Elizabeth Austin, Vice President for Policy & Communications
Innovation Illinois

Creating a New Monster: Illinois’ “Fair Tax” Plan Could – and Should – Have Been an Easier Sell
Written By: Jeff Ignatius
Section: Commentary/Politics

Category: Illinois Politics

2014-04-30 15:32:22

(Listen to author Jeff Ignatius discuss the Fair Tax on “Midwest Week” with WVIK’s Herb Trix.)

Illustration by Leo Kelly

How would you like a cut in your income taxes while protecting funding for education and public safety?

Or how would you like the Illinois General Assembly to stick it to you by making permanent the income-tax increase of 2011 that is supposed to (mostly) expire next year?

Lucky you: In a bizarre set of circumstances, a “Fair Tax” proposal would give you both! Ninety-four percent of Illinois taxpayers would see their income taxes drop in 2015, while lawmakers wouldn’t have to make the tough budgetary choices they promised to. Win-win!

Sound confusing? It is. Sound impossible? It isn’t.

Bear with me, and I’ll explain how the legislature – specifically Democrats faced with two highly unattractive options in an election year – devised a “third way” that’s not really a third way at all. It’s merely a variation on one of those highly unattractive options, but it’s been cleverly packaged on the assumption that voters have short memories.

This gambit is technically still in play, but on Tuesday it looked nearly certain that it lacked the legislative votes to move forward to a November referendum. If it has indeed died for 2014, let this be a cautionary tale about the perils of broken pledges – and attempts at marketing them as something positive.

And if the plan finds new life in the next few days, it’s essential that lawmakers and voters understand what it really is.

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