Tax policy in Illinois

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Tax policy in Illinois

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Tax rates in 2014
Personal income tax:  5%
Sales tax:  6.25%
Corporate income tax:  9.5%
Tax revenues in 2013
Total tax collections:[1]  $38.715 billion
Tax collections per capita:[1]  $3,005
Rank:[1]  14
Tax policy in other states
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Illinois generates the bulk of its tax revenue by levying a personal income tax and a sales tax. The state derives its constitutional authority to tax from Article IX of the state constitution.[2][3]

In 2013, according to the Federation of Tax Administrators, Illinois collected $38.715 billion in tax revenues. The state's tax revenues per capita were $3,005, ranking 14th highest in the United States. The single greatest source of tax revenues in Illinois is the state's personal income tax, which accounted for 42.7 percent of total tax collections in 2013.[4][5]

Tax policy can vary significantly from state to state. States levy taxes to help fund the variety of services provided by state governments. Tax collections comprise approximately 40 percent of the states' total revenues. The rest comes from non-tax sources, such as intergovernmental aid (e.g., federal funds), lottery revenues and fees. The primary types of taxes levied by state governments include personal income tax, general sales tax, excise (or special sales) taxes and corporate income tax.[6]

Tax rates

Personal income tax

See also: Personal income tax

Illinois utilizes a flat personal income tax rate of 5 percent in determining an individual's personal income tax liability.[7][8][9]

The table below summarizes personal income tax rates for Illinois and surrounding states in 2014. Numerical rankings are tabulated by excluding states with no personal income tax (as well as New Hampshire and Tennessee, which charge income tax only on dividends and interest) and are based on the highest possible tax rate for which an individual might be liable. Because some states are excluded from the rankings and a few share common uppermost rates, there are 33 numerical rankings, with one indicating the highest uppermost rate and 33 indicating the lowest.[8]

Personal income tax rates, 2014
State Tax rates Number of brackets Brackets Ranking
Lowest Highest Lowest Highest
Illinois 5% 5% 1 Flat rate 25
Indiana 3.4% 3.4% 1 Flat rate 31
Michigan 4.25% 4.25% 1 Flat rate 30
Ohio 0.534% 5.392% 9 $5,000 $200,000 22
Wisconsin 4.4% 7.65% 4 $7,500 $225,000 10
Note: For complete notes and annotations, please see the source below.
Source: Tax Policy Center, "Individual State Income Tax Rates 2000-2014," accessed September 26, 2014

Capital gains tax

See also: Capital gains tax

A capital gains tax is a tax levied on the profit gleaned from the sale of a capital asset. Examples of capital assets include stocks, businesses, land parcels, homes, personal items and more. Capital gains are taxable at both the federal and state levels. While the federal government taxes capital gains at a lower rate than regular personal income, states usually tax capital gains at the same rates as regular income. In Illinois, the uppermost capital gains tax rate is five percent. The combined uppermost federal and state tax rates total 28 percent, ranking 26th highest in the nation.[10][11][12]

The table below summarizes uppermost capital gains tax rates for Alabama and surrounding states in 2014.

Uppermost capital gains tax rates by state, 2014
State State uppermost rate Combined uppermost rate Ranking
Illinois 5.00% 28.00% 26
Indiana 3.40% 27.80% 33
Michigan 4.40% 27.80% 33
Ohio 5.40% 28.30% 22
Wisconsin 7.70% 28.20% 23
U.S. AVERAGE 28.70%
Note: For complete notes and annotations, please see the source below.
Source: Tax Foundation, "The High Burden of State and Federal Capital Gains Tax Rates," February 11, 2014

Sales tax

See also: Sales tax

The sales tax rate in Illinois for tax year 2014 is 6.25 percent. The table below summarizes sales tax rates for Illinois and surrounding states in 2014. The table also notes the state's policy with respect to types of items commonly exempted from sales tax (i.e., food, prescription drugs and nonprescription drugs).[5]

Sales tax rates, 2014
State Sales tax rate Exemption status
Food Prescription drugs Nonprescription drugs
Illinois 6.25% 1% (taxed at a reduced rate) 1% (taxed at a reduced rate) 1% (taxed at a reduced rate)
Indiana 7% Exempt Exempt Taxable
Michigan 6% Exempt Exempt Taxable
Ohio 5.75% Exempt Exempt Taxable
Wisconsin 5% Exempt Exempt Taxable
Source: Tax Policy Center, "Sales Tax Rates 2000-2014," June 2, 2014
Illinois is one of

Excise taxes

See also: Excise taxes

Excise taxes, also known as selective sales or differential commodity taxes, are levied for the sales of specific goods or services. Excise taxes are considered indirect taxes because they are not charged directly to individuals. In most cases, the excise tax is paid by the producer or seller of an item. The cost of the tax is then included in the sale price of the item and passed on to the consumer. The tables below provide excise tax rates for motor fuel, alcohol and cigarettes in Illinois and surrounding states. In Illinois, excise tax revenues comprised 16.9 percent of total tax collections in 2013.[13][14][15][16]

Fuel excise tax rates, 2014 (in cents per gallon)
State Gasoline Diesel Gasohol
Excise tax Other taxes Total tax Excise tax Other taxes Total tax Excise tax Other taxes Total tax
Illinois 19¢ 1.1¢ 20.1¢ 21.5¢ 1.1¢ 22.6¢ 19¢ 1.1¢ 20.1¢
Indiana 18¢ 18¢ 16¢ 16¢ 18¢ 18¢
Michigan 19¢ 19¢ 15¢ 15¢ 19¢ 19¢
Ohio 28¢ 28¢ 28¢ 28¢ 28¢ 28¢
Wisconsin 30.9¢ 32.9¢ 30.9¢ 32.9¢ 30.9¢ 32.9¢
Note: For full annotations, see the source below.
Source: Tax Policy Center, "State Motor Fuel Tax Rates 2000-2011, 2013-2014," June 10, 2014
Alcohol excise tax rates, 2014 (in dollars per gallon)
State Liquor Wine Beer
Tax rate Does general sales tax apply? Tax rate Does general sales tax apply? Tax rate Does general sales tax apply?
Illinois $8.55 Yes $1.39 Yes $0.23 Yes
Indiana $2.68 Yes $0.47 Yes $0.12 Yes
Michigan 1 Yes $0.51 Yes $0.20 Yes
Ohio 1 Yes $0.32 Yes $0.18 Yes
Wisconsin $3.25 Yes $0.25 Yes $0.06 Yes
1"In 17 states, the government directly controls the sales of distilled spirits. Revenue in these states is generated from various taxes, fees, price mark-ups, and net liquor profits."
2"General sales tax applies to on-premise sales only."
3"Washington privatized liquor sales effective June 1, 2012."
4"All wine sales are through state stores. Revenue in these states is generated from various taxes, fees, price mark-ups, and net profits."
Note: For full annotations, see the source below.
Source: Tax Policy Center, "Alcohol Rates, 2000-2010, 2013-2014," June 10, 2014
State cigarette taxes, 2014 (in cents per pack)
State Tax rate National ranking
Illinois 198¢ 17
Indiana 99.5¢ 32
Michigan 200¢ 12
Ohio 125¢ 29
Wisconsin 252¢ 10
Note: For full annotations, see the source below.
Source: Tax Policy Center, "State Cigarette Taxes, 2014," April 17, 2014

Corporate income tax

See also: Corporate income tax

Corporate income tax is the tax levied by a state on a company's profits. In tax year 2014, Illinois levied a 9.5 percent corporate income tax. The table below lists the corporate income tax rates for Illinois and surrounding states in 2014.[17][18]

Corporate income tax rates, 2014
State Tax rate Brackets Number of brackets
Lowest Highest
Illinois 9.5% Flat rate 1
Indiana 8% Flat rate 1
Michigan 6% Flat rate 1
Ohio N/A1
Wisconsin 7.9% Flat rate 1
Note: For complete notes and annotations, please see the source below.
Source: Tax Policy Center, "State Corporate Income Tax Rates 2002-2008, 2010-2014," June 11, 2014

1Ohio does not levy a corporate income tax for most corporations, but does levy a Commercial Activity Tax. This tax is equal to $150 for gross receipts between $150,000 and $1 million, with an additional 0.26 percent levied for gross receipts over $1 million.[18]

Business tax climate

In October 2014, the Tax Foundation released a report evaluating business tax systems in the states for fiscal year 2015. The report's authors graded the states by analyzing more than 100 variables in five general tax areas: corporate taxes, personal income taxes, sales taxes, unemployment insurance taxes and property taxes. States were scored on a scale of zero to 10, with a score of zero indicating the worst business tax structure and a score of 10 indicating the best. States were then ranked on a scale of one to 50, with a ranking of one indicating the state with the best business tax climate and a score of 50 indicating the state with the worst.[19]

In fiscal year 2015, Illinois's business tax climate was ranked 31st in the nation. The table below provides scores and rankings for Illinois and surrounding states. To access the full report, click here.[19]

Business tax climate rankings, fiscal year 2015
State 2014 2015 Change from 2014 to 2015
Rank Score Rank Score Rank Score
Illinois 29 5 31 4.96 -2 -0.04
Indiana 8 5.99 8 5.96 0 -0.03
Michigan 13 5.74 13 5.64 0 -0.1
Ohio 42 4.45 44 4.41 -2 -0.04
Wisconsin 43 4.42 43 4.46 0 0.04
Note: For complete notes and annotations, please see the source below.
Source: Tax Foundation, "2015 State Business Tax Climate Index," October 28, 2014

Property tax

See also: Property tax

Most often, property tax applies to real estate, although some states levy property taxes on other types of personal property, such as automobiles. Generally speaking, an individual's property tax liability is determined by the tax rate and the tax base, which is "determined by both the assessed value of the property and ... the share of the assessed value that is subject to tax." To learn more about property tax, including tabulation methods, see here.[20][21][22]

Property taxes comprise the lion's share of local government revenues. In 2010, property taxes accounted for 75 percent of the tax revenues collected by local government entities (such as cities, counties, school districts, etc.). States, on the other hand, generate very little revenue from property taxes. Property tax rates can vary substantially from locality to locality within a state.[20][21]

The table below provides the mean amount of property taxes paid, as well as property tax as a mean percentage of home value, for Illinois and surrounding states for 2012. In terms of mean property taxes paid, Illinois ranked highest when compared to surrounding states.[20]

Mean property taxes paid per state, 2012
State Mean property taxes paid Property tax as a percent of home value
Illinois $4,469 2.28%
Indiana $1,200 0.93%
Michigan $2,347 2.06%
Ohio $2,327 1.77%
Wisconsin $3,530 2.07%
Source: Tax Policy Center, "Residential Property Taxes in the United States," November 18, 2013

The table below lists per capita state and local property tax collections for Illinois and surrounding states for fiscal year 2011. According to the Tax Foundation, which compiled the data below, Illinois ranked 11th in the country in terms of property tax collections per capita.[23]

State and local property tax collections per capita, 2011
State Collections per capita Ranking
Illinois $1,881 11
Indiana $971 37
Michigan $1,374 22
Ohio $1,140 30
Wisconsin $1,724 13
Source: Tax Foundation, "Facts and Figures 2014: How Does Your State Compare?" March 18, 2014

Estate and inheritance taxes

See also: Estate and inheritance taxes

Estate and inheritance taxes are levied on the property of deceased individuals (decedents). Generally speaking, an estate tax is applied to the value of a decedent's property and is paid from the estate before distribution to any heirs. By contrast, an inheritance tax is paid by the heir or heirs of a decedent's assets.[24][25][26]

Illinois is one of 15 states (plus the District of Columbia) that levies an estate tax. In addition, Illinois taxpayers are also liable for the federal estate tax. The table below summarizes the estate tax rates for Illinois and surrounding states in 2014.[26]

Estate taxes, 2014
State Exemption threshold Minimum rate Maximum rate
Illinois $4,000,000 0.8% 16.0%
Indiana N/A
Michigan N/A
Ohio N/A
Wisconsin N/A
Note: For complete notes and annotations, please see the source below.
Source: Tax Foundation, "Facts and Figures 2014: How Does Your State Compare?" March 18, 2014

Tax revenues

Tax collections by source as a percentage of total tax collections in 2013.

The table below summarizes general fund revenue sources for Illinois and surrounding states in 2013. All figures are rendered in millions of dollars (for example, $1,500 translates to $1,500,000,000). Per capita figures have not been abbreviated.[27]

General fund revenue sources, 2013
State Sales tax Personal income tax Corporate income tax Other taxes and fees Grand total Per capita revenues
Illinois $7,335 $16,630 $3,086 $9,239 $36,290 $2,817.08
Indiana $6,796 $4,978 $968 $1,720 $14,462 $2,200.92
Michigan $1,832 $5,844 $438 $1,075 $9,189 $928.59
Ohio $8,445 $9,508 $262 $11,344 $29,559 $2,554.62
Wisconsin $4,410 $7,497 $925 $1,254 $14,086 $2,554.62
Source: National Association of State Budget Officers, "State Expenditure Report: Examining Fiscal 2011-2013 State Spending," accessed September 24, 2014

The table below lists tax collections by source as a percentage of total collections for Illinois and surrounding states in 2013.[3]

Tax collections by source as a percentage of total tax collections, 2013
State Property tax Sales tax Select sales (excise) taxes Personal income tax Corporate income tax Other taxes
Illinois 0.2% 21.1% 16.9% 42.7% 11.5% 7.6%
Indiana 0% 40.1% 20.7% 29.4% 4.6% 5.1%
Michigan 7.8% 33.6% 15.3% 32.8% 3.6% 6.9%
Ohio 0% 31.6% 18.3% 36.1% 1% 13%
Wisconsin 0.9% 26.7% 16.2% 43.7% 5.8% 6.7%
Source: Tax Policy Center, "State Tax Collection Shares by Type 2000-2013," June 20, 2014

Tax ballot measures

Voting on Taxes
Taxes.jpg
Ballot Measures
By state
By year
Not on ballot
See also: Taxes on the ballot and List of Illinois ballot measures

Ballotpedia staff have tracked 3 ballot measures relating to taxes in Illinois.

  1. Illinois Ad Valorem Tax Prohibition Amendment (1970)
  2. Illinois Millionaire Tax Increase for Education Question (2014)
  3. Illinois Redemption Periods for Property Sold for Non-Payment of Taxes, Amendment 1 (1990)

Recent news

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Contact information

Illinois Department of Revenue
101 West Jefferson Street
Springfield, Illinois 62702
Phone: 800-732-8866
Website: http://www.revenue.state.il.us/index.htm#&panel1-1

See also

External links

References

  1. 1.0 1.1 1.2 Federation of Tax Administrators, "2013 State Tax Revenue," accessed October 14, 2014
  2. Constitution of the State of Illinois, "Article IX," accessed October 17, 2014
  3. 3.0 3.1 Tax Policy Center, "State Tax Collection Shares by Type 2000-2013," June 20, 2014
  4. Federation of Tax Administrators, "2013 State Tax Revenue," accessed October 14, 2014
  5. 5.0 5.1 Tax Policy Center, "Sales Tax Rates 2000-2014," June 2, 2014
  6. Brunori, D. (2011). State Tax Policy: A Political Perspective. Washington, D.C.: The Urban Institute Press
  7. Investing Answers, "Tax Bracket," accessed September 24, 2014
  8. 8.0 8.1 Tax Policy Center, "Individual State Income Tax Rates 2000-2014," May 28, 2014
  9. Tax Foundation, "State Personal Income Tax Rates and Brackets 2014 Update," March 21, 2014
  10. Internal Revenue Service, "Topic 409 - Capital Gains and Losses," August 19, 2014
  11. Tax Foundation, "The High Burden of State and Federal Capital Gains Tax Rates," February 11, 2014
  12. Tax Policy Center, "Capital Gains and Dividends: How are capital gains taxed?" June 22, 2011
  13. Tax Policy Center, "Excise taxes," accessed October 20, 2014
  14. Investopedia, "Excise Tax," accessed October 20, 2014
  15. Tax Foundation, "Excise Taxes," accessed October 20, 2014
  16. Internal Revenue Service, "Excise Tax," accessed October 20, 2014
  17. Investopedia, "Corporate Tax," accessed September 24, 2014
  18. 18.0 18.1 Tax Policy Center, "State Corporate Income Tax Rates 2002-2008, 2010-2014," June 11, 2014
  19. 19.0 19.1 Tax Foundation, "2015 State Business Tax Climate Index," October 28, 2014
  20. 20.0 20.1 20.2 Tax Policy Center, "Residential Property Taxes in the United States," November 18, 2013
  21. 21.0 21.1 Bankrate, "Property taxes explained," February 3, 2000
  22. Investopedia, "Property Tax," accessed September 26, 2014
  23. Tax Foundation, "Facts and Figures 2014: How Does Your State Compare?" March 18, 2014
  24. About.com, "What's the Difference Between an Estate Tax and an Inheritance Tax?" accessed October 16, 2014
  25. Internal Revenue Service, "Estate Tax," updated September 29, 2014
  26. 26.0 26.1 Tax Foundation, "State Estate and Inheritance Taxes in 2014," May 28, 2014
  27. National Association of State Budget Officers, "State Expenditure Report: Examining Fiscal 2011-2013 State Spending," accessed September 24, 2014