Illinois’ finances would look very different today if it adopted tax systems like its Midwestern neighbors do, according to a new video that breaks down the differences.
That’s the message Illinois Senate President John Cullerton has been delivering around the state for years and that the Illinois Economic Policy Institute acknowledged in its new video that explains how Illinois stacks up against Wisconsin, Indiana, Missouri and Iowa.
The takeaway: neighboring states are taxing more broadly and at higher rates than Illinois, which has lower rates and higher family incomes.
“This confirms what I’ve long been saying to my colleagues, to taxpayers and to newspaper editorial boards around the state since 2011,” Cullerton said.
“Unfortunately, there’s been a systematic and focused effort to tell a negative story about Illinois’ tax policy in an effort to advance an ideological approach at the expense of a responsible and balanced approach to budgeting. The false narrative is easier to believe, but that doesn’t make it fact based.”
Illinois has a flat tax rate of 3.75 percent that applies to everyone, no matter their income level. Illinois does not tax retirement income. It has a sales tax, but it’s only on goods, not services. Families here have higher annual incomes than families in neighboring states, so while they pay more in total taxes, the rates are lower.
Wisconsin has a progressive income tax of 4 percent to 7.65 percent. It taxes retirement income, it has a sales tax and taxes both goods and services, such as admission to amusement parts, internet access and car repairs.
Indiana has a flat tax of 3.3 percent, but it also has a second local income tax that varies by county. It also taxes retirement income, has a sales tax and taxes goods and services.
Missouri has a progressive income tax of 1.5 percent to 6 percent. The top bracket kicks in once people make $9,000 a year, so basically everyone in Missouri pays about 6 percent. People in St. Louis and Kansas City pay an additional 1 percent that goes to those cities. Missouri taxes retirement income, has a sales tax and taxes goods and services.
Iowa has a progressive income tax from .36 percent to 8.98 percent. The top rate kicks in for those making more than $68,000 a year. Iowa taxes retirement income, has a sales tax and taxes good and services.
Cullerton commended the Illinois Economic Policy Institute for its simple and effective explanation of Illinois’ basic tax policies, noting that it is important that everyone is on the same page if Illinois is to have an honest discussion about how to balance its budgets in the future.
“Republican leaders during the past year have joined Democratic leaders in acknowledging that Illinois must look at revenue in the future,” Cullerton said. “I applaud that. But we all have to start from a place of truth about how we compare to other states and what we can do better.”
