The state of Illinois asks a lot of its taxpayers. For decades, since 1969, the state has faced budget crisis after crisis, and deep political divides between those who believe in tax increases to balance the budget and those who don’t. Unfortunately, the historical trend has left the state with one of the highest income taxes in the country. Now, the state is asking even more of its taxpayers.
Effective this year, the Illinois state income tax has increased from 3.75% to 4.95% and the corporate tax rate has increased from 5.25% to 7%. The road to this budget was filled with strife. After a record two years without a state budget in place, the legislature passed this new budget with the tax increase; however, Governor Bruce Rauner vetoed the budget. Despite this, the Democrats in the legislature were able to garner enough Republican votes to override the governor’s veto.
This tax increase was designed to bring in over $5 billion in additional tax revenue per year, and will see homes with $100,000 in annual income pay an additional $1,200 per year in taxes. The tax hike has its critics, who say that the budget does little to make any long-term changes, like modifications to the State pension system or to provide incentives to attract businesses to Illinois. In addition, the budget is filled with the kind of special projects that tend to infuriate fiscal conservatives.
For individual and corporate taxpayers, this may be hard to swallow, as many will be forced to make difficult choices to budget for the increased taxes. Of course, the end result of this may be a further exodus of high-income Illinois taxpayers, who are increasingly finding other states that do not take so much of their income. And the increase in the corporate tax rate will certainly make the state less attractive to businesses who are either considering Illinois or are on the fence about leaving the state.
To make matters worse, credit rating agency Moody’s has indicated that Illinois’ state debt and inability to pay back that debt may drop Illinois’ bond status to “junk.” This would cripple the state’s ability to efficiently borrow money.
Call an Experienced Family Attorney
The Law Offices of Robert S. Thomas has provided tax advice and guidance for over two decades. With a Master of Law Degree (LLM) in Taxation, and a license to practice in the United States Tax Court, I have the knowledge and experience to tackle any tax dispute. Contact the Law Offices of Robert S. Thomas at 847-392-5893 for to schedule a consultation or visit our website today.