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Op-Ed: Neighbor states pursue real tax
relief while Illinoisans get hype
By Justin Carlson | RealClearWire
Illinois families have paid a total of $2,721 in higher taxes since
Pritzker imposed 24 tax and fee hikes in 2019. All together with this
year’s “relief,” that leaves the average family with a net tax hike of
$2,165 in four years. |
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 A typical middle-class family in
Illinois faces the highest tax burden of all 50 states and a pandemic recovery
that lags the nation, so what have Illinois’ elected leaders decided to do about
it
Handed billions of dollars in federal pandemic relief, Gov. J.B. Pritzker and
the Illinois General Assembly passed a budget that provides tax relief of $556
for the typical family. Most of it expires by this time next year.
Hooray?
While $556 is better than nothing, the changes mainly serve to let Pritzker air
re-election ads touting his “relief plan.” He also made sure his largesse was
noted through mandatory signs at grocery stores and on gas pumps.
A quick glance at the map shows Pritzker should be anything but
proud. In the wake of the COVID-19 pandemic, 33 states, including most of
Illinois’ neighbor states, have made long-term changes to help grow their
economies. They’ve implemented permanent, pro-growth reforms and tax relief for
their residents and businesses.
Illinoisans already pay the second-highest property tax in the nation, live
under the most units of local government, face the worst pension crisis in the
nation and failed to recover 136,400 jobs lost to the pandemic. They need real
relief, not gimmicks.
It gets worse when tallying how high taxes have risen since Pritzker took
office. Illinois families have paid a total of $2,721 in higher taxes since
Pritzker imposed 24 tax and fee hikes in 2019. All together with this year’s
“relief,” that leaves the average family with a net tax hike of $2,165 in four
years.
Among those tax hikes was doubling the state gas tax to 38 cents from 19 cents,
and adding an automatic annual increase. The gas tax is expected to reach 45
cents by July 2023. But part of Pritzker’s election gimmick is a six-month
temporary delay on the next automatic gas tax hike until Jan. 1, 2023, after his
re-election campaign is over.
It doesn’t have to be like this.
Here’s what Illinois could learn from its neighbors.
Indiana
Despite their already competitive income tax rate, Indiana continues to pursue
an even more competitive tax system, having recently passed legislation to
reduce its income tax rate from 3.23%, already the third-lowest rate in the
country, to 3.15% in 2023 and 2024. It is scheduled to drop to 2.9% by 2029, so
long as certain economic and fiscal conditions are met.
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Iowa
Iowa enacted sweeping tax reforms this year that make its tax system
more competitive. Once the current reforms are phased in, Iowa will
have a single income tax rate of 3.9%. Previously, they had a
nine-level income tax with a top rate of 8.98%. The new rate is less
than half that. The state will also boast a 5.5% flat corporate tax
rate, no alternative minimum taxes and the elimination of the
state’s inheritance tax. Once these reforms are adopted, Iowa could
improve its Business Climate Tax Index position from 38th to 15th,
leaving Illinois in last place.
Kentucky
Kentucky’s legislature recently passed tax reform proposals over the
veto of Gov. Andy Beshear. The reforms lower the current flat income
tax rate to 4.5% from 5% in 2023. It also creates a trigger for
automatic, one-half percent rate cuts when state funding reserves
are maintained and revenue exceeds spending.
Wisconsin
This one is forthcoming. Rebecca Kleefisch, one of Gov. Tony Evers’
potential opponents in the upcoming election, has said making
“transformational income tax reform” is her top priority, along with
ending the state’s tax on retirement income. She says those changes
are necessary for Wisconsin to compete with neighboring states,
adding the potential for even more serious tax competition for
Illinois in the years ahead.
When Illinois hiked taxes in the years following the Great
Recession, it stunted the state’s recovery: job creation lagged
neighboring states. We must prevent those same mistakes.
Illinois faces unique obstacles – with declining population, high
property taxes and the worst pension debt in the nation. The state
cannot afford to let politicians get away with the status quo.
It will take more than six months, or even a year,
of election gimmicks packaged as temporary tax relief to bring
Illinois back to its full potential.
Justin Carlson is a policy analyst at the Illinois
Policy Institute, a nonpartisan research organization.
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