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IMA Tax Policy Blog

Illinois Biz Won’t Like These Tax Numbers

As Springfield lawmakers wrestle with whether to raise taxes to ease a sea of red ink, a new report takes a good look at where Illinois business stands in terms of what it’s paying relative to its peers.

The bottom line: Nationally, Illinois stands about in the middle, ranking 30th of the 50 states and District of Columbia, in terms of the share of business profits taken by the state and local tax man combined. Our position has improved a tad in recent years as the income tax hike pushed through by former Gov. Pat Quinn began to go away.

But Illinois is an outlier compared to other Midwestern states when it comes to the combined state and local business tax burden. Not only Indiana and Wisconsin but big peer states Ohio and Michigan have lower burdens than we do. The only one higher is Minnesota, and just by a little bit.

The report comes from Anderson Economic Group, a consultancy with offices here, in New York and in East Lansing, Mich. I’ve written about their annual reports for a while now, because their methodology of looking not just at gross taxes but taxes as a share of profits will have a lot of resonance with business folk.

According to the report, in 2015, the most recent year for which figures are available, Illinois business paid 9.4 percent of profits in state and local taxes.

The rate was lower in other Midwest states, including Indiana at 7 percent, ranking fifth; Missouri, 7 percent, sixth; and Ohio 7.3 percent, ninth. Michigan was 16th and Wisconsin 24th, with rates of 8 percent and 8.7 percent, respectively. All of them now have GOP governors who have pushed through tax cuts.

In the Midwest, only Minnesota had a higher business tax burden than Illinois: 9.7 percent of profits, or 32nd.

Nationally, Illinois’ rank of 30th is an improvement over last year’s 32nd. That appears to be due largely to the repeal of the Quinn hikes, which took effect mid-fiscal 2015.

Illinois’ public utilities and income taxes were relatively high, according to the Anderson study, but its general sales taxes were generally low.

Illinois ranked dead in the middle—26th—in terms of the share of the total tax burden paid by business. But again, the state’s 39.4 percent share was higher than the Midwest average, though interestingly tied with Indiana.

Anyhow, as with all statistical studies, there’s lots to slice and dice and spin your own way. For instance, is it better to keep taxes low or raise them to pay off ballooning state debt?

But for those who want to know how we really stack up, this is a good place to look.


Source: Crain’s Chicago Business