By: Nick Binotti
The Tax Foundation released its annual State Business Tax Climate report that compares the impact of various taxes such as income, sales and property taxes on businesses, and Illinois scored 37th out of the 50 states, its worst rank in over a decade.
Unlike most studies of state taxes, the Tax Foundation’s index is focused on the how more than the how much, in recognition of the fact that there are better and worse ways to raise revenue.
All Illinois neighbors improved their competitiveness, some significantly.
Illinois, meanwhile, has done nothing. Its overall tax burden not only makes it difficult to attract new business, but also for existing businesses to stay here, reinvest and expand.
Do nothing Illinois falls behind
Nationally, Illinois’ worse-than average ranking dropped to 37th from 36th. Moving down the charts one slot might not seem like much, but Illinois had been stuck there for several years.
Since 2019, four out of five neighbors have moved up the national rankings, and now all are far more competitive than Illinois.
Iowa’s recent tax reforms pushed the state’s ranking up 12 spots to 33rd. Wisconsin is the nation’s 24th most competitive, up 8. Kentucky moved up five positions to 18th. And Missouri, Michigan and Indiana are now 12th, 11th, 10th, respectively.
Keeping things flat
Most of Illinois’ rankings in the various categories are at the bottom nationally. Its corporate income tax ranks 43rd. Its sales tax is 39th. Unemployment insurance is 42nd. And, unsurprisingly, property taxes are the worst at 45th in the nation.
The only saving grace in these rankings is Illinois’ flat income tax for individuals. Illinois ranks 14th nationally.
Ironically, that is the one ranking that Illinois’ ruling majority directly attempted to change with its failed 2020 Fair Tax campaign, which pushed to move Illinois to a progressive income tax.
A flat income tax is so critical to the Tax Foundation’s competitiveness ranking that Massachusetts, previously a flat tax state, fell 12 slots – mostly due to imposing a 4 percent surtax on income over $1 million. If Illinois had succeeded at his own initiative, Illinois would now be among the worst-of-the-worst states for overall competitiveness.
Iowa, which had one of the worst business climate rankings for years, actually managed to leapfrog Illinois by lowering its tax income tax rates and simplifying its tax structure. By 2026, the state will have a flat tax of just 3.9 percent.
The rest of Illinois’ neighbors have also cut their income taxes over the past couple of years:
- Missouri passed a law in 2022 to accelerate the state’s already-planned drop in its income tax rates. The state’s top income tax rate decreased from 5.3 percent to 4.95 percent in 2023. Missouri’s top tax rate is on income above just $8,968 a year, so it’s effectively a flat tax state.
- Indiana passed a law in 2022 that dropped the state’s flat rate from 3.23 percent to 3.15 percent in 2023. Indiana’s governor just signed a new budget that immediately drops the rate down to 3.05 percent, with additional drops occurring in later years.
- Kentucky passed a law in 2022 that dropped the state’s flat 5.0 percent rate to 4.5 percent in 2023. The law also requires the rate to fall to 4.0 percent in 2024 if specific financial conditions are met.
- Wisconsin passed a law in 2022 that dropped the rate of the state’s 2nd-highest income bracket (income between $24,250 and $266,930) from 6.27 to 5.3 percent. The latest budget signed by the governor makes additional cuts to the two lowest tax brackets.
- Lastly, Michigan’s flat rate of 4.25% has fallen to 4.05%, the result of a 2015 law that requires tax cuts when specific financial conditions are met.
Conclusion
Illinois’ flat income tax used to be enough to allow the state to successfully compete for businesses.
But the situation has changed as nearly two dozen states nationally have slashed their rates, moved from a progressive structure to a flat one, or moved to no income tax at all. By doing nothing, Illinois keeps falling further behind.
Read more from Wirepoints:
- As request for federal bailout pends, does anybody have a clue how much migrants arriving in Chicago are costing taxpayers?
- Illinois’ coming drop in Medicaid enrollment should be good news, not a lament
- States across the country are cutting taxes…but not Illinois. Not even with “highest on record” budget revenues.
Audio and summary 
If this bill passes, say goodbye to local control over all Illinois parks and expect to see open drug and alcohol use, needles, no sanitation and fire hazards, but no ordinary park users.
Suppose you got a reliable tip about a horse running in the next race. You decide not to bet and the horse wins. Some would say (and so would I) that the tip was wasted. Suppose you regularly read WP and learn Illinois is in a death spiral. If you decide to stay, isn’t the info/knowledge wasted?
This is what Democrats do when in charge, take your money. Yet most Illinois qresidents would rather vote for an uneducated, money grabbing, rob you blind Democrat than vote for any Republican, with new ideas, under any circumstances. So here we are.
This proves that Pritzker is not sincere when he talks about the attractiveness of Illinois for businesses. It is absolutely galling that this blowhard shelters his billions in offshore accounts to avoid taxes, while he expects business owners to disproportionately shoulder the load.
Illinois politicians view YOUR money as THEIR money. All Illinois tax policy is driven by you, the serf, paying tribute to your feudal lords, the Dems. The best example is Illinois’ confiscatory property taxes. From the Dems view, YOUR house is on THEIR land, and they have no problem charging you a high “rent” to allow your house to sit on their land. Can’t pay your property taxes? Your house becomes their house.
Don’t want to be a serf? MOVE!
You have to ask what the difference is between Illinois and Michigan, given that both states have lunatic Democrat governors. The answer is that Michigan still has Republicans in control of the legislative branch of government. Illinois is an example of what kind of dumpster fire is created by Democrats when they’re the only ones in control.
One of the leading defenders of the failed public employee pensions in IL was cheering how tax and fee increases and federal bailouts had boosted the states confiscation of private wealth recently, so all was great in IL. He didn’t cheer the economy, or how middles class working people were doing, or anything much else that most taxpayers are concerned with. Just all the tax and fee increases were cheered. There you have it for IL.
All business leaders in the US and internationally should realize that the
JB in Pritzker’s name stands for
“ Just Bulls… Pritzker “
You cannot believe anything that he spouts
From his pie hole