By Ted Dabrowski and John Klingner
One of the few positives in Illinois we’ve been able to cheer over the years has been the state’s flat income tax rate. For years, Illinois was a flat tax state surrounded largely by progressive tax states, including Iowa, Kentucky, Wisconsin and Missouri.
The flat tax helped offset Illinois’ other punishing taxes, including the nation’s second-highest property taxes and some of the country’s highest gas taxes.
But now, that income tax advantage is nearly gone. Iowa has joined the growing list of flat and no-income tax states across the country. Gov. Kim Reynolds recently signed a new set of tax reforms into law that will turn the state’s progressive income tax into a 3.9 percent flat tax by 2026.
Iowa joins Kentucky, which went to a flat 5 percent tax rate in 2018, in rejecting progressive taxation. Indiana and Michigan already have flat tax rates of 3.23 percent and 4.25 percent, respectively.
Missouri, while still maintaining a nine-bracket progressive rate structure, has been flattening its brackets. The top marginal rate is now 5.4 percent on income over $8,584, making it similar to a flat tax for most earners.
Wisconsin now stands alone as the only neighbor with a truly progressive income tax.
Illinois’ competitiveness may suffer an even larger hit this year if residents vote for Amendment 1 on the November ballot. That amendment will enshrine Illinois’ collective bargaining rights – some of the most union-friendly in the country – in the Illinois Constitution. If that happens, any labor reforms that could lower taxes will effectively be blocked.
The passage of Amendment 1 would go in the opposite direction of trends in Illinois’ neighboring states. All those states with the exception of Missouri have passed Right-to-Work laws and most have passed major reforms to limit the powers of their public sector unions.
Illinois has long been a net loser of people to every one of its neighboring states. That outflow will only grow as our neighbors increase their competitiveness.
Read more about Illinois taxes:
- Illinois lawmakers want to cement union powers into the state constitution
- Pritzker’s $1 billion in “tax relief” would be devoured by inflation in less than a month
- Higher gas prices mean higher taxes: Illinoisans now pay the nation’s 2nd-highest gas taxes
- WalletHub, Tax Foundation confirm what Illinoisans already know: they’re overtaxed
- Scope Of Pending Illinois Constitutional Amendment Goes Far Beyond Appearances
With $162 billion more from taxpayers, couldn’t you deliver a few bond upgrades, too
Audio and summary 
A largely unasked question is becoming glaring: Is Illinois doing all it should to use artificial intelligence to make government cost less and work better? So far, the evidence says no.
But Illinois has one slight advantage left. They do not tax retirement income.
Hardly makes up for property, gas, entertainment, etc. Taxes, though
Depends on how much you make vs. how much you pay in property taxes as well as your alternative state of residence. A couple retired with 250k in income are saving about 12k per year in income taxes compared to Wisconsin. Saving 3 or 4 grand in property taxes seems small by comparison.
Drope the dem
There is no advantage of any kind for Illinois.
Get out while the going is good.
Indiana also has local income taxes, so the grass is not always greener across the border. Top rate I saw is 3.05%. Indiana also charges a wheel tax in some counties, which can come to over $500 per year.
https://www.tax-rates.org/indiana/local-income-taxes
https://www.in.gov/bmv/fees-taxes/vehicle-registration-fees-and-taxes/excise-tax-information/
And Indiana is about to cut its income tax to 3%.
The price you pay for living in Illinois gets higher every year.
I fought hard against the Progressive Tax in Illinois simply because Governor Pritzker and the majority of Illinois politicians can’t be trusted with such authority. Unions in Illinois cannot be trusted with Amendment 1 either. I have been preaching against Amendment 1 for months now and will continue. Please read it, please understand it and don’t be fooled, please understand what it will do to you personally and financially especially if you are unable to move out of the state of Illinois and VOTE “NO”
I’m guessing, much like the vote no on Fair Tax, that money and activity against Amendment 1 will start flowing in a few months before election. I’d be surprised if there was much movement before June.
I do know labor is already doing subtle advertising via the Fight Back Fund.
I’m not waiting till June. We let Biden sit in the basement and didn’t fight back early and continuously and look where we are now. It’s not too soon. We’re in Illinois it may even be too late.
I don’t care if the tax is flat or progressive, as long as it is effectively low and efficiently used.
The article implies we’ve lost something because our neighbors have joined us with a flat income tax to protect the middle class; but we’ve lost nothing except for some of the cover for our astronomical property tax.
Note that Indiana’s state income tax rate is accompanied by a flat tax imposed by each county. Their rates range from 0.35% to 3.38%. Further, something we’ll NEVER enjoy in Illinois, Indiana is rebating $125 per taxpayer due to higher than expected tax revenues in 2021. Refunds will exceed $500M. That’s a strong example of how a state competes for residents, businesses and growth. Unfortunately, Illinois is handcuffed by its fiscal mismanagement and its unending hunger to steal more of our wallets.
And we need an unprecedented ground game to defeat Amendment 1. We’re doomed if that passes.
I still don’t believe the numbers regarding the number of people who have left. How do you have the huge numbers in all border states growing by that much and yet it’s only a few people who have left? Would anyone be surprised if those numbers were manipulated?
Natives leaving are being replaced by third world immigrants. https://www.msn.com/en-us/news/us/us-census-illinois-population-sees-growth-in-latinx-and-asian-residents-steep-drop-in-whites/ar-AANg42s US Census: Illinois population sees growth in Latinx and Asian residents, steep drop in whites Chicago remains the 3rd largest city in the U.S., according to data released Thursday by the U.S. Census Bureau. The city’s population grew by nearly 51,000 from 2010 to 2020.The growth was fueled by Asians with a jump of about 45,000, followed by the Latinx community with an increase of about 41,000. The city saw the largest drop in its Black population, declining by almost 85,000 compared to 2010. “Black residents of Chicago have always… Read more »
Illinois lost 700,000 white people in 10 years statewide; and at least 85,000 black people in just the city (article ignores how many black people left state) over the same time period. These are your neighbors, your congregation members, your extended family members, your co-workers. Illinois had roughly 8,000,000 white people in 2012 and lost nearly 9-10% of them since the last census, and lost, at a minimum, 5% of black people coming just from Chicago city limits alone. They were replaced by at least 700,000 Latinks, asians, an “more than one race” individuals. Look around at your suburbs, your… Read more »
Would you mind so many blackS leaving if more White had stayed? That’s why a Trump won. There are still lots of white people in the nation and the a Democrats are so corrupt and incompetent. It doesn’t matter which party is in power, they’ve both neglected immigration and urban areas. Trumps proposals were so draconian that his own party wouldn’t pass it, and Democrats are feckless and obviously profiting off of it, so nothing gets done? How much of a cut does our “deep state” get for letting in all of the fentanyl and other illegal drugs? As for… Read more »
I said natives because virtually all blacks are natives and most have deeper roots in america that most whites and other BIPOC.
But it’s not about white/black or dumb vs. smart. It’s about the school I referenced declining in educational attainment as third worlders with third world values take over local schools and education is unimportant.
wtf is a latinx?
All of us are latinks.
All one has to do is look at the subtractions from income and various tax credits to recognize Illinois is very far away from a “flat tax.”
Most people don’t realize Missouri’s graduated state income tax rate was once far more progressive than it is today. What happened? Their tax brackets were NOT indexed to inflation (that changed just a couple years ago, which explains the odd amounts). Their current tax brackets are essentially 50 years old. And even those 1970 tax brackets are a minor adjustment to brackets that are even older.
JB’s Fair Tax had the same problem. Glad it lost.