According to the Tax Foundation’s 2018 State Business Tax Climate Index, Illinois ranked 29th for its tax competitiveness, a decline of one spot from 2017.
The Foundation’s annual index is designed to help business leaders, government policymakers, and taxpayers determine how their state’s tax system compares to others. Here’s how Illinois rated on all metrics:
- Overall rank: 29th
- Corporate tax: 36th
- Individual income tax: 16th
- Sales tax: 35th
- Unemployment insurance tax: 42nd
- Property tax: 45th
Neighboring Indiana and Missouri ranked better, at 9th and 16th, respectively. Iowa, meanwhile, ranked 40th; Kentucky ranked 33rd; and Wisconsin ranked 38th.
In outlining the notable ranking changes from last year’s Index, the study authors pointed out the results of Illinois’ budget saga:
“The Illinois Legislature overrode the governor’s veto to adopt a budget which increased the state’s single-rate individual income tax from 3.75 to 4.95 percent, and the corporate income tax rate from 7.75 to 9.5 percent,” they wrote. “Pass-through entities also pay a supplemental individual income tax of 1.5 percent (on the same base), known as the personal property replacement tax (PPRT), bringing the individual income tax rate for pass-through businesses to 6.45 percent. A similar 2.5 percent PPRT is included in the state’s 9.5 percent corporate income tax rate. These rate increases caused the state to slip slightly in the rankings, to 29th overall.”
The tax increases were passed to fill the budget shortfall and pay for a backlog of unpaid bills, which is unusual and unique to Illinois on its own because no other state has an “unpaid bills” category, Tax Foundation senior policy analyst and lead study author Jared Walczak told the Chicago Tribune.
“We’ve seen tax increases again, we’ve seen a failure to address several structural concerns of long standing, which is why the state ranks a little worse than the middle of the pack on structure and perhaps even struggles more than that ranking would indicate,” Walczak told the Tribune.