Illinois lawmakers approve largest tax increase in state history

illinois tax increase

Taxpayers in Chicago and other Illinois cities will be paying 66 percent more income tax until 2015. Image: CC wilhemja/Flickr

An Illinois tax increase of 66 percent was approved by the state’s legislature Wednesday. The state of Illinois, reeling from years of fiscal mismanagement, has been looking for ways to narrow a $15 billion budget deficit. The Illinois income tax increase, the largest in the state’s history, is a desperate step to solve budget woes many other states with the same problem continue to avoid.

Illinois tax increase survives 11th-hour vote

With the Illinois tax increase, a state crippled from a budget crisis has taken the bull by the horns. A temporary increase in the Illinois income tax from 3 to 5 percent will be combined with a 2 percent limit on spending increases. Republicans refused en masse to vote for the measure, which was passed Wednesday just hours before a new Illinois General Assembly was sworn in at noon. The last election took a big bite out of the state’s Democratic majority and swept out a group of lame-duck legislators who bore no political consequences by supporting the Illinois tax increase.

Solving the Illinois budget crisis

The Illinois income tax increase was adopted after several other proposed taxes were rejected by Republican lawmakers. A $1-a-pack increase in cigarette taxes to fund school districts didn’t fly. A plan to get an $8.7 billion installment loan, paid off by a portion of the tax increase, also failed. The loan would have been used to immediately pay overdue bills owed to businesses and social-service agencies. Democratic Governor Pat Quinn’s office said the Illinois tax increase will raise $6.8 billion a year. A 2 percent cap on spending growth will proceed in tandem. If that limit is breached the Illinois tax increase is automatically nullified.

Impact of the Illinois tax increase

The Illinois income tax increase to 5 percent is the largest, percentage wise, in the state’s history. But it is still lower than many other midwestern states. Neighboring Iowa’s income tax rate is 6.4 percent, Missouri’s is 6 percent, and Wisconsin’s is 7.5 percent. The tax increase boosts the state income tax for someone formerly paying $1,000 to $1,666. In 2015 the rate drops to 4 percent and that taxpayer’s liability drops to $1,333. The additional tax revenue will balance the state’s budget, but Republicans call it a job-killing hoax that will become permanent.


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