By: Ted Dabrowski and Nick Binotti | Wirepoints
Illinois’ individual income tax – flat and relatively low since its inception in 1969 – has had a moderating effect on Illinois’ otherwise overall high tax burden. It’s been one of the few tax “advantages” Illinoisans have had over residents in other states.
But that advantage has been gradually worn down over the years. While 27 states cut their individual income tax rates over the last 14 years, Illinois was one of just nine states across the country to hike them (see appendix).
The 2021-2023 period, in particular, saw nearly two dozen states enact income tax cuts – many of them significant. Many progressive tax states cut their top marginal rates, some flat tax states lowered their rates and yet others abandoned their progressive tax schemes altogether in favor of lower, flat income tax structures. Illinois, meanwhile, did nothing.
Wirepoints ranked the 50 states from lowest to highest based on each state’s highest marginal tax rate – the highest rate for progressive tax states and the flat rate for flat tax states. Comparing how each state’s rank has changed between 2010 and 2024 serves as a rough proxy for which states have become more/less competitive on income taxes.
By that simple measure, Illinois’ drop in rank across the 50 states has been significant.
- In 2010, Illinois’ 3 percent income tax rate was the 10th-lowest in the country.
- By 2020, Illinois’ rate had risen to 4.95 percent and its position had fallen to 18th.
- Now, after three years of rate cuts by other states, Illinois’ ranking is 25th.
- That drop in rank from 10th- to 25th is the 3rd-worst decline in the nation.
Read more here.