State’s reliance on income taxes doubled over past 20 years
Illinois has only been collecting an income tax for 55 of the state’s 206-year history, but it could soon account for more than 60% of the state’s general fund revenue.
That’s according to a new report from the Illinois General Assembly’s Commission on Government Forecasting and Accountability that estimates the state will receive nearly $31.4 billion in state income tax revenue in the next fiscal year that begins in July.
The state’s reliance on income tax to bolster the general fund — the state’s chief operational revenue account — has nearly doubled since 2004, state records show. That year, income taxes only accounted for 30.3% of general fund revenues.
The trend is worrisome to some lawmakers and government finance watchdog groups.
“To be at 60% for income tax is an extraordinary number because generally it is a more volatile mode of taxing than some other taxes like sales tax,” said Joe Ferguson, president of the nonpartisan government finance research organization the Civic Federation. “It’s a general concern because it involves the evolution of a tax structure which was already, and throughout history, been known to not be well aligned with the economy.”
| Year | Cook | Collar counties | Downstate | Out-of-state | Total |
| 2021 | $11,068,732,585 | $7,617,442,455 | $5,294,193,204 | $2,853,810,021 | $26,834,178,265 |
| 2020 | $9,061,439,275 | $6,249,321,176 | $4,650,681,687 | $2,153,994,360 | $22,115,436,498 |
| 2019 | $8,570,529,061 | $6,054,334,984 | $4,572,340,216 | $1,879,197,095 | $21,076,401,356 |
| 2018 | $8,558,795,373 | $5,964,078,404 | $4,488,241,506 | $1,835,062,497 | $20,846,177,780 |
| 2017 | $7,109,876,390 | $5,035,082,663 | $3,767,983,993 | $1,418,410,529 | $17,331,353,575 |
| 2016 | $5,737,062,980 | $4,167,881,660 | $3,194,533,791 | $864,200,655 | $13,963,679,086 |
| 2015 | $5,748,487,420 | $4,197,230,919 | $3,199,135,687 | $1,110,294,883 | $14,255,148,909 |
| 2014 | $7,291,034,909 | $5,319,968,217 | $4,185,016,493 | $1,322,526,076 | $18,118,545,695 |
| 2013 | $6,708,522,663 | $4,985,022,069 | $4,064,741,071 | $1,195,117,807 | $16,953,403,610 |
| 2012 | $6,918,027,033 | $5,066,491,875 | $4,166,567,868 | $1,176,582,633 | $17,327,669,409 |
| Source: Illinois Department of Revenue | |||||
Gov. J.B. Pritzker’s office pointed to fluctuations of the state’s income tax rate over the past two decades having an effect on the growth of revenue as well.
Until 2010, the personal income tax rate in Illinois was 3%, but it jumped to 5% from 2011 through 2014. Legislators dropped the rate to 3.75% from 2015 through 2017, but then raised it again to its current 4.95% since then.
Pritzker’s office argued the strength of the state’s income tax base is positive for Illinois.
“This change reflects the growth of Illinois’ tax base, and the current strength of the state’s economy,” said Pritzker spokesman Alex Gough. “Naturally, as the economy grows and wages rise, so too will revenue from the income tax.”
But what happens in poor economic times?
“You’d be looking at raising the income tax rate, cutting state services, finding new tax revenue elsewhere or a combination of all three,” said Ralph Martire, executive director of the nonpartisan Center for Tax and Budget Accountability. “The problem is the state’s sales tax base is way too narrow because it doesn’t reflect the modern, service-based economy.”
Ferguson agrees, noting the Civic Federation is researching what the effects would be on the state’s overall sales tax rate if it included service-based businesses in its collections. As to why these businesses have escaped the state’s taxation grasp for so long, Ferguson said it comes down to “politics.”
“Professional services have lobbyists and these things tend to find recalibration in times of crisis, and the state is doing a good job of managing long-term chronic ills, which deprives us from the political necessity to change,” he said.
State Rep. Anna Moeller, an Elgin Democrat who sits on COGFA’s oversight board, said she is unconcerned about the state’s growing reliance on income taxes to fund day-to-day operations.
“The increase in our income taxes shows that people are more prosperous,” she said. “That’s a good indicator to me to the general well-being of the people who live here.”
According to the most recently available data from the Illinois Department of Revenue, the state received 41.2% of all income tax revenue from workers in Chicago and suburban Cook County in 2021. That amounted to more than $11 billion. The average Cook County worker paid $4,840 in income taxes.
Among the five collar counties of DuPage, Kane, Lake, McHenry and Will counties, workers living there accounted for 28.4% of the state’s total income tax revenues in 2021. But the average worker living in those five counties paid $5,162 in income taxes that year. Combined, taxpayers in those counties paid more than $7.6 billion in income taxes.
Downstate workers accounted for 19.7% of the state’s income tax revenue in 2021, IDOR records show. They were responsible for nearly $4.2 billion of the state’s income tax haul. On average, downstate workers paid $2,778 in income taxes to the state that year.
Workers living out of state generated almost $2.9 billion of income tax for Illinois in 2021, which was 6.8% of the state’s total. The average out-of-state worker paid $4,612 in income taxes that year, according to the state data.
State Sen. Don DeWitte, a Republican from St. Charles who is also on the COGFA board, said the governor should be looking for ways to reduce the state’s reliance on income taxes, not increasing it.
“As state budgets have grown massively under Gov. Pritzker, he is relying more and more on income taxes to fund spending as other revenue sources dry up,” he said. “This trend is clearly unsustainable, and the people of Illinois should be the governor’s priority — not his piggy bank.”