Illinois collected nearly $6 billion more in taxes and fees in 2012 than in the year before.
That's the greatest increase of any state in the nation, according to the U.S. Census Bureau's annual State Government Tax Collections report released a few days ago.
Rising from $30.6 billion in 2011 to $36.4 billion in 2012, Illinois' state tax increase largely comes on the backs of workers who saw individual income taxes climb by nearly $4.5 billion, thanks to the first full year of a 2-percentage-point income tax hike.
“That's one week's pay that we're losing,” said state Sen. Matt Murphy, a Palatine Republican who voted against the income tax hike in January 2011. “You used to get a little relief in Illinois on income tax from high property and sales taxes, but now taxpayers have no oasis, no respite. They're getting hit from all angles.”
The state's individual income tax rate had been 3 percent since 1990. It is now 5 percent, but is set to drop to 3.75 percent at the start of 2015 unless the legislature acts to extend the higher rate before then.
In the 2012 report, Illinois moves up from the state collecting the fourth most individual income taxes to No. 3.
Illinois also now collects the fourth most taxes and fees of any state after holding the No. 6 spot for the last several years.
With almost 13 million residents, Illinois is the fifth most populated state in the nation, after California, Texas, New York and Florida. So it stands to reason that tax and licensing fee collections would be higher than in most other states.
The income tax is not the only category in which the state saw growth.
The census report is broken up into five revenue categories: Property taxes, sales taxes, licenses, income taxes and “other” taxes. Illinois' rank conspicuously rose in property, sales and other tax categories in 2012. Within those categories are another 25 taxation subcategories in the report, and the state moved up in 10 of those as well.
Illinois' rank dropped in just two subcategories — public utilities licenses and “other” licenses. Those drops amounted to roughly $13 million less in revenue combined than in 2011, according to the report.
Illinois is not No. 1 in any of the report's categories or subcategories.
Every state except three — California, New Hampshire and Wisconsin — increased total tax and fee collections last year, according to the report. The overall increase in Illinois represents a 19.1 percent spike in the state's total tax haul.
Only North Dakota and Alaska experienced higher rate gains with 47 percent and 27.3 percent bumps, respectively, but in actual dollars those increases amounted to only about $1.8 billion more for North Dakota and $1.5 billion for Alaska.
Because the income tax rate hike propelled the state's increase, it's a lightning rod.
Murphy is worried the state's lagging employment climate won't lead to the tax gains expected from the income tax hike.
“In the near term you're going to see that revenue come in, but it's a question of whether or not, if these employment numbers continue to lag, you're going to be able to sustain that (increased) revenue for very long,” he said. “The jobs aren't there.”
But state Sen. Dan Kotowski, a Park Ridge Democrat, said the temporary income tax rate hike along with some policy shifts have made the state more fiscally responsible. He cited new spending rules, performance-based funding and other reforms as ways the state has worked to eliminate its deficit.
“We can't spend more than we have now,” Kotowski said. “We have to live within our means. I believe we're heading in the right direction based on policies put in place. It took us decades to get into this mess, but comprehensive reforms have been put in place to make sure we're never in this place again.”
Without the 2-percentage-point increase, the state's individual income tax revenue would have come in at a little more than $9.4 billion instead of the $15.7 billion the state received in 2012. Corporate income tax rates that are placed on profits of businesses were increased as well, and resulted in modest increases between 2011 and 2012.
Money from the income tax increase was used by the state to pay off some of its $15 billion deficit in 2011. The plan was to also use some of it to pay off loans that would be taken out to cover the remainder of the deficit, but the legislature never approved the borrowing plan, so many of the state's bills remain unpaid.
“This is why people are moving out of the state,” said state Rep. Patti Bellock, a Hinsdale Republican who serves as the minority spokeswoman on the House Appropriations-Human Services Committee. “People are being taxed to death and they don't want to put up with it because they don't feel there is a good fiscal policy in our state.”
Bellock used to serve as co-chairman of the legislature's Commission on Government Forecasting and Accountability, which uses the census bureau report as the basis to compare and contrast Illinois' tax collections to other states in a separate study every two years.
Jim Muschinske, revenue manager at the commission, said “it's pretty much the definitive report” for a comparison of state tax finances.
“You're not going to get this kind of report from a third party that doesn't have an ax to grind,” he said.
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