January 13, 2015


State & Local Taxes in 2015


Illinois Tax Code Features

Progressive Features

• Provides a 10 percent refundable Earned Income Tax Credit (EITC)

• Provides a non-refundable property tax credit

• Requires the use of combined reporting for the corporate income tax

Regressive Features

• Personal income tax uses a flat rate

• Comparatively low income tax exemptions

• All retirement income is exempted through the personal income tax

• State sales tax base includes groceries, though taxed at a lower rate

• Local sales tax bases include groceries

• Fails to provide a property tax “circuit breaker” credit for low-income taxpayers

• Fails to provide refundable child tax credits

Tax Changes Enacted in 2013 & 2014

• Temporary flat rate of 5 percent fell to 3.75 percent on January 1, 2015 (Who Pays 4th Edition included the 3.75 percent rate)

ITEP Tax Inequality Index

According to ITEP’s Tax Inequality Index, Illinois has the 5th most unfair state and local tax system in the country. States with regressive tax structures have negative tax inequality indexes, meaning that incomes are less equal in those states after state and local taxes than before (See Appendix B for state-by-state rankings and more details).

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