Ready, Set, Reform – How the Income Tax Can Help Make the Illinois Tax System Fairer and More Sustainablereport
The Illinois tax system faces a crisis of both adequacy and equity. The state must confront a projected $11.6 billion budget shortfall over the next two fiscal years that will likely require a variety of difficult spending and tax policy choices, and also faces a fundamental long-term mismatch between its spending needs and the revenues available to fund those needs. The Illinois tax system is also chronically unfair, imposing much higher tax rates on middle- and low-income families than on the best-off Illinoisans.
A revitalized state personal income tax is the best tool available for resolving these twin crises. Alone among the major taxes levied by states, the income tax applies a higher rate to the upper-income taxpayers whose incomes are growing the fastest. Increasing the Illinois income tax—currently one of the lowest and least-fair such taxes in the nation—will restore a modicum of fairness to the state’s tax system while helping to ensure that state revenues are sufficient to fund public services in the upcoming fiscal year and in the long run.