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 Families in Illinois again carry a heavier tax load than
anywhere else in the United States, but the survey showing that also finds a
significant willingness by taxpayers to lighten that load by moving – or
getting a tattoo.
Illinois residents pay higher effective local and state tax rates than anywhere
else in the nation, according to WalletHub’s annual survey. The results were the
same in 2019 and earlier, except that the household’s taxes have grown 11% since
2017.
Illinois families pay just shy of 15% of their income in total state and local
taxes, based on the average U.S. household income of $60,602. That is $9,064 in
state and local taxes, which are on top of federal taxes averaging $9,000.
While the results were similar last year, the interesting piece of the survey is
what taxpayers are willing to do to avoid taxes: “37% of people would move to a
different country for a tax-free future. 26% would get an ‘IRS’ tattoo and 19%
would stop talking for 6 months.”
Tattoos and silence are amusing, but the willingness to leave the country should
be a warning to Illinois politicians seeking to make the nation’s heaviest state
and local tax burden even heavier. Gov. J.B. Pritzker is pushing voters on Nov.
3 to trust state lawmakers with greater power to tax by eliminating the Illinois
Constitution’s flat income tax protection and replacing it with progressive tax
rates.
Pritzker wants progressive rates, which he dubs the “fair tax,” to yield $3.7
billion from the state economy by taxing different income groups at different
rates. The problems with his plan start with the fact that the state can’t tax
someone if they leave the state, and the WalletHub survey is just the latest to
show people will move to avoid higher taxes.
Illinois is already losing people, with six consecutive years of population
decline. Leading the moves out of Illinois are those in their prime working
years, meaning people currently paying taxes and with children who would have
been Illinois’ next generation of taxpayers. Four of the five states with the
slowest growth have progressive income taxes: Illinois is the fifth, so why
would it impose a progressive tax, too?
Pritzker’s progressive tax initially hits the income groups already most likely
to leave Illinois. Recent IRS data shows Illinoisans making $200,000 or more
were twice as likely to leave compared with the typical resident. New York
discovered how mobile wealth can be, as Gov. Andrew Cuomo lamented: “‘Tax the
rich! Tax the rich! Tax the rich!’ We did. Now, God forbid, the rich leave.”
Only New York lost a higher share of residents making $200,000 or more than did
Illinois in tax year 2018.
Tax Illinois’ wealth more and watch the businesses and job creators head out.
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That was what happened in the only state to impose
a progressive tax in the past 30 years. While two other states
repealed their progressive tax structures over that time,
Connecticut imposed one and saw middle-class taxes rise 13%, poverty
increase by 50%, 362,000 jobs go away and $10 billion evaporate from
its economy.
Polls other than WalletHub’s also show people are willing to move to
avoid taxes. In October, a poll found 61% of Illinoisans considered
moving out of state in the past year, with state taxes being their
top reason for considering a move. That was up from 51% in the same
poll a year earlier, which echoed a poll in 2016 by the Paul Simon
Public Policy Institute.
Illinois’ jobs growth is already sluggish and lags the national
average. A progressive tax would cost Illinois 56,336 jobs –
significantly more than the state gained in all of 2019 – and wreak
havoc on the state economy, according to an analysis by the Illinois
Policy Institute.
Plus, the progressive tax is intended to do next to nothing to solve
the state’s biggest financial problem: public pension debt. Pritzker
intends to use only $200 million a year from the new tax for
pensions. The tax is about added spending, with Pritzker’s promises
about how he would spend the money totaling $10 billion a year when
the tax is only expected to yield $3.7 billion.
Of course, the current public health crisis and associated market
slowdown is expected to blow an even larger hole in the budget.
Illinois Forward is a plan by the Illinois Policy Institute that in
five years would balance the state budget, pay down debt and cut
taxes. The first of three commonsense ideas calls for achieving what
a progressive tax would not: dealing with runaway pension costs by
amending the Illinois Constitution to curb the growth in future,
not-yet-earned benefits.
Illinois’ high taxes and the WalletHub ranking are largely driven by
the nation’s second-highest property taxes. The state imposed two
historic income tax hikes in 2011 and again in 2017, then in 2019
imposed 20 new or increased taxes and fees – including doubling the
state gasoline tax, which the WalletHub survey ranked as
third-highest in the U.S.
All those tax hikes have failed to keep Illinois from having the
second-worst fiscal health in the nation, but they have again made
Illinois No. 1 for taking money from its residents.
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