Illinois trails neighbors in tax competitiveness
(The Center Square) – The Tax Foundation’s annual State Tax Competitiveness Index ranks Illinois 38th out of 50 states.
Tax Foundation Vice President of State Tax Policy Katherine Loughead said Illinois moved up one spot from 39th last year after descending or holding steady each previous year since 2020.
“That is better than Illinois ranks on a lot of lists, and one of the big things that does help Illinois on this index is the fact that Illinois does have a flat individual income tax structure,” Loughead told The Center Square.
The index evaluates how states structure their tax systems.
Illinois was 11th for the individual income tax component, helped by a flat rate of 4.95%.
“But on all the other metrics, corporate taxes, sales taxes, property taxes, and unemployment insurance taxes, Illinois ranks in the bottom ten,” Loughead said.
Neighboring states fared better, led by Missouri at 9th and Indiana at 14th.
“A lot of states surrounding Illinois, like Missouri and Indiana and others, have really done a lot of work to reduce their income tax rates over time,” Loughead said.
The index ranked Iowa 18th, Wisconsin 20th and Kentucky 26th. Wyoming finished first overall and New York finished last at 50th.
Loughead said having an estate tax hurt Illinois in the property tax component of the index.
“Illinois is one of a minority of states that does continue to levy either an estate or inheritance tax,” Loughead said.
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