Is Illinois a "low-tax" state? Here are some perspectives found online:

The Center for Tax and Budget Accountability --" A non-partisan, non-profit research and advocacy think tank that promotes fair, efficient and progressive tax, spending and economic policies."

According to Illinois Tax Climate (.pdf), a written supplement to oral testimony provided to the House Revenue Committee by Ralph Martire, director of the Center for Tax and Budget Accountability:

No matter the data source, it is clear that, overall, Illinois is a low tax state, when tax burden is measured as a percentage of income.  ...(The) tax burden in Illinois is lower than all of our surrounding states...

When analyzing United State Bureau of Economic Analysis personal income data and United States Census state data, Illinois ranks 41st in the nation in state and local tax burden....But, while Illinois is a low-tax state overall, it is nonetheless a very high tax state for middle and low-income families.....The lowest 20% of income earners in Illinois pay 12.7% of their income in taxes, while the wealthiest 20% pay only 4.6% of their incomes in taxes.  That means the working poor in Illinois have almost triple the tax burden as the most affluent. Compared nationally, Illinois ranks as the sixth most regressive taxing state.

The Tax Foundation --"The mission of the (non-partisan) Tax Foundation is to educate taxpayers about sound tax policy and the size of the tax burden borne by Americans at all levels of government. From its founding in 1937, the Tax Foundation has been grounded in the belief that the dissemination of basic information about government finance is the foundation of sound policy in a free society."

The Tax Foundation's  report, "Illinois' State and Local Tax Burden, 1970-2007" (.pdf) says that our state and local tax burden is 10.8%,  22nd in the nation (national average is 11%). And that our total tax burden, including Federal taxes, is 32.2%, ranking us 14h in the nation (national average is 32,7%)

The Federation of Tax Administrators--"The Federation of Tax Administrators (FTA) was organized in 1937 to improve the quality of state tax administration by providing services to state tax authorities and administrators. These services include research and information exchange, training, and intergovernmental and interstate coordination. "

The most recent Illinois figures from 2005 state & local revenue as a percentage of personal income show that, if you look at all revenues collected by state & local government from its own sources (taxes and fees)  you'll find that this amount equals14.8% of the state's  gross personal income,  ranking us 45th in the nation.

The Illinois Taxpayer Education Foundation (National Taxpayers United of Illinois --"The largest and most effective statewide taxpayer group in Illinois."

In a Sept. 6, 2007 release, Dennis Constant cites  the Tax Foundation report above and writes:

Relative to other states, Illinois is no longer in the high-tax-state category... To be sure, Illinois is not a low-tax-state, and state spending, especially for the benefit of powerful special interests, continues to rise.

Eariler, in December, 2006, NTUI President Jim Tobin said in this analysis (pdf):

Illinois is a high-tax state, not a low-tax state. The non-partisan Tax Foundation in Washington, D.C., reports that for 2006, Illinois’ State-Local Tax Burden is already at 10.9 percent, the 14th highest in the nation. The Tax Foundation measures tax burden by taking taxes as a percentage of income. The total tax burden for Illinois (Federal, State and Local) for 2006 was 32.7 percent, the 10th highest in the nation. Only nine states have total tax burdens higher than Illinois, and the Commercial Club wants to raise taxes even more. Are these ‘80 chief executives’ of the Civic Committee living on another planet?

Illinois taxpayers, both individual and corporate, are maxed-out. Any further increases in state taxes only will encourage companies to move to states with lower tax burdens and increase Illinois unemployment. The state must do what companies in the private sector do to avoid deficits: Cut spending. Higher taxes are an option the state can’t afford now.

Citizens for Tax Justice - "A nonpartisan, nonprofit research and advocacy organization dedicated to fair taxation at the federal, state, and local levels" and The Institute on Taxation and Economic Policy "--a non-profit, non-partisan research and education organization that works on government taxation and spending policy issues"

These groups direct readers to  "The Citizen's Guide to the Illinois State Tax System: What Every Concerned Illinoisan Should Know," which says in this chapter:

While Illinois is often referred to as a "low-tax" state, that is not true for everyone. The regressive structure of the system means that the tax burden on low-income Illinoisans is actually among the highest in the nation. The income tax is comparatively low, but the property tax is very high. The property tax burden has grown as a share of Illinois taxes at a time when states have been increasing their reliance on income taxes. Loopholes in the income tax, sales tax and property tax base mean that some taxpayers receive special tax breaks, shifting the burden to all other taxpayers.... The lowest 20 percent of Illinois families and individuals – with income below $15,000 – pay 13 percent of their income in state and local taxes. Meanwhile, the wealthiest one percent – with average incomes of $1.2 million – pay only 6 percent of their income in Illinois taxes.

In another publication, "An Overview of the Illinois Tax System," (.pdf) the Center for Tax Justice explains:

Several measures are frequently used for cross state comparisons of tax burdens. Illinois’s state and local tax burden can be seen as somewhat above average, or somewhat below average, depending on which of these measures is used.

In particular:

• Expressed as a share of gross state product, taxes in Illinois are 33rd in the nation, more than five percent below the national average —and lower than all but one of the surrounding states.
• As a share of total personal income, state and local taxes in Illinois are more than four percent below the national average. At 10.3 percent of income, Illinois’s tax burden ranks 35th in the nation—and is lower than all but one of the surrounding states
• On a per capita basis, Illinois state and local taxes are 15th in the nation, more than four percent higher than the national average—and second highest among surrounding states.

Each of these measures offers some insight, but each has its limitations as a measure of tax burden....measuring tax burdens as a percentage of income .... takes account of a state’s overall ability to pay taxes. For this reason, our analysis will focus primarily on this measure of tax burdens (underlined above).

The Illinois Policy Institute-- "Free enterprise and limited government for a better Illinois"

In an October, 2004 policy brief, "`Illinois is a low tax state'--The Big Lie"  (.pdf) the IPI says:

Even as the Fiscal Year 2005 state budget plans to roll back the taxes and fees that have led to Illinois' decoupling from the national economic recovery, there are still those who would have us believe that Illinois is a "low-tax state"...(cites Tax Foundation studies)  Taxes in Illinois may not be what they are in Connecticut and California but in no way is Illinois a “low tax state”. Due to our relatively high tax burden and our overly complex tax code, tax increases are not an option for Illinois as long as it plans to have a nationally competitive economy.  Instead, Illinoisan should simplify the current code to make the state a friendlier climate for business.

Tax Rates and Tax Burdens, a Nationwide Comparison (.pdf)

Prepared for the District of Columbia in 2005: 

Tax burdens are compared for a hypothetical family that consists of two wage-earning spouses and one school-age child.  The gross family income levels used are $25,000, $50,000, $75,000, $100,000 and $150,000.....  The family at each income level is assumed to own a single-family home and to reside within the confines of the city.

For Chicago

INCOME      BURDEN   RANKING

$25,000       13%              3rd

$50,000       10.6%          10th

$75,000       9.6%             19th

$100,000     8.7%              26th

$150,000     7.7%              35th

States Ranked by Total Taxes and Per Capita Amount--U.S. Census Bureau

Illinois is 32nd in tax per capita, but the Tax Foundation notes that these tables reflect "only state-level taxes. Local taxes are excluded, such as property taxes and local sales taxes."

Other sites and citations?

UPDATES. Responses to the above: 

1.  A letter from Greg Blankenship, president of the Illinois Policy Institute:

When we looked at this question we came to the conclusion that Illinois was moderate to high.  I discount taking one measure and saying, “A ha! Illinois is a low tax state.”  Or, “Ah ha! Illinois is a high tax state.”  It depends on what I'm seeking to measure.  In our case we look at the burden on the Illinois economy.  Why?  Because our mantra is that if we take care of the Illinois economy, the Illinois economy will take care of state and local government.  The best way to increase tax revenue is to have a healthy and vibrant economy.    

I also think you have to look at one’s total tax burden – state, local and federal taxes.  These don’t exist in a vacuum.  Illinois is a high tax state because we pay more in federal taxes.  If you are in the 4th quintile of the tax bracket (33%) at the federal level and have a state and local tax burden of 10.8% -- your total burden is 43.8%.  The highest rate in Britain is 40%.  An upper middle class Brit could potentially see a tax hike by moving to Chicago.  The impact on the economy is what matters and doesn’t really matter where the money is going once it leaves the productive private sector to be redistributed by the unproductive public sector.

I discount, but don't dismiss, taxes as a percentage of personal income because personal income is the state productivity/population = personal income.  Large states with high incomes are going to appear to have lower tax burdens than small states with less income.

Finally, my question is who decides what is the state’s ability to pay?  That’s an arbitrary measure.

2. Letter from Curtis S. Dubay, economist with the Tax Foundation:

Our tax-burden ranking... is widely cited as the best calculation of each state’s tax burden for a few reasons. First, we count every tax (that) states and localities collect.

It is important to remember that local taxes need to be taken into account when comparing states because each state has different fiscal interactions between state and local governments. In some state, education is funded by local taxes and in others by state funding. Only looking at state level taxes makes for an inaccurate comparison.

Our burdens are taxpayer based, not tax collector based. The other figures you cited only look at where the taxes are collected, not who is paying them. The incidence of taxes is vital to accurately gauging the burden state and local taxes imposed on taxpayers in each state. We account for incidence.

Lastly, we use the broadest, most comprehensive measure of income to calculate our burdens. It encompasses all income that is available to pay state and local taxes.

When we calculate our burdens Illinois comes out middle of the pack. However, because the states’ burdens are close to each other, it is not hard for Illinois to jump close to, or into the top ten with tax increases.

(Follow-up note) --  The Federation of Tax Administrators'  figures are revenues as a percent of income. Our burdens are just taxes. FTA, therefore, will include all types of revenue including taxes and fees. We do not include fees. We include all taxes in our burdens, so corporate taxes are included. It is important to remember that all corporate taxes are paid by individuals, whether they are customers, employees or shareholders of a company. We have an incidence model that calculates the incidence of corporate taxes for every state based on each state’s share of the three stakeholder groups mentioned above.

3. Letter from Gerald T. Prante, also an economist with the Tax Foundation:

With regards to distributional analysis like those from CTJ and CTBA, the results all depend on a lot of things. For example, what is your unit of analysis (families, tax units, households, married families only, persons, etc.)? How do you align the income groups? Do you account for household size? What income measure do you use and how do you treat the double-counting issue with transfers? What is your incidence of the taxes paid, especially the property tax? Do you count non-tax sources of revenue like lotteries? How do you account for taxes paid by Illinois residents on out-of-state transactions, including corporate income taxes? Do you take into account the deductibility of state/local taxes in the federal tax system, which would tend to make the state tax system look less progressive since rich people tend to itemize and claim that deduction?

These all will affect the final results, and it can lead to cherry-picking assumptions by certain groups if they have a desire to make the results look a certain way. That's why, in my opinion, distributional studies should put forth the results based upon alternative assumptions for transparency -- just to see how much of a difference changing some assumption can make.

4. E-mail from Steve Stanek, managing editor of the Heartland Institute publication Budget & Tax News:

There are many ways to judge tax burden. For instance, Ralph Martire criticizes Illinois for having a relatively low state income tax of 3 percent. However, many states with higher flat taxes or progressive tax rates allow larger personal exemptions than Illinois does, so we start paying tax on money that in other states would not be taxed. So this is not an apples to apples comparison.
 
Also, is Martire claiming total tax burden or just the state/local tax burden? According to the most recent Tax Foundation report, Illinois ranks 22 (1 would be highest) in state/local tax burden in the U.S. in 2007. So we're just a little above smack dab in the middle by that measure.
 
HOWEVER, and this is a big however, if you throw in federal tax burden, Illinois ranks 14 in the nation. In other words, 36 states have a lower total tax burden than Illinois when federal taxes paid by Illinois taxpayers are included. This is due mainly to Illinois, particularly in the Chicago metro region, having household incomes higher than the national average. Because of the progressivity of the federal tax code, higher-income households pay more tax.
 
According to the Tax Foundation, the total tax burden in Illinois (state, local and federal taxes combined) is 33.2 percent. The national average is 32.7 percent.
 
And Illinois probably would rank higher (heavier tax burden) still because of things like local sales taxes that don't figure into most estimates. Some communities have multiple sales tax burdens, depending on whether you are buying a new car, an appliance, a restaurant meal, etc. Chicago is an example of this.
 
And let's not forget the hundreds of fees in Illinois that are not counted as taxes yet which cost significant amounts of money.

5. My notes from a conversation with Ronald Alt, senior researcher for the Federation of Tax Administrators

We look at the total of what’s called “own-source” revenue, which is all the revenue collected by state and local bodies excluding federal transfers but including taxes and fees. As you probably realize, politicians like to raise fees and that way can tell voters they didn’t raise taxes.

The weakness of this kind of analysis is that it looks at the state as a whole. In Illinois there’s an issue Chicago and Cook County levying various taxes that other jurisdictions don’t, so in Chicago and Cook County the burden is going to be higher, and we don’t break that out.
 
Is Illinois a low-tax state? There’s no easy answer to that. I think, overall, that Illinois is a low-tax state, however your taxes tend to be regressive (with the flat income tax) so the burder tends to fall more heavily on lower income residents who may be said to have a relatively high burden.

The Tax Foundation’s results dffer from ours because they  differ in how they allocate business income and certain other taxes. We lump all business taxes in because it’s our reasoning that the people of Illnois ultimately pay that, whereas  the Tax Foundation does calculations to say, OK, only x percent of corporate income taxes in Illinois is paid by the people (either through lower property values or lower wages or pass along) and y percent is paid by the stockholders. It’s a sophisticated analysis they do and I’m not sure it’s worth the effort for most states.

6.  Additional notes from my conversation with Ralph Martire, director of the Center for Tax and Budget Accountability.

Some analysts like to include the federal tax burden when making state-by-state comparisons. But this is misleading. The federal portion of the tax burden is the same no matter where you live.

What matters is only this: What percentage of your state’s total income is being taken out in taxes and fees? And that includes everything from fishing license fees, property taxes, sales taxes, cigarette taxes, anything and everything taken by any and every unit of state and local government down to mosquito abatement districts.

If you add in federal taxes, which are progressive, Illinois looks like a higher tax state than it is because we’re an affluent state.

The Institute on Tax and Economic Policy has done a regressivity analysis of all the states and ranked them. Illinois is the 6th most regressive state when you consider all the  taxes and fees.   

The truth is, government in Illinois is under-funded. If HB 750 (an income tax hike from 3 to 5 percent), we’d jump only from 45th to 41st

We don’t need tax increases, we need tax reform. We need to shift this burden more toward the upper earners.

Our current income tax is effectively very low.  You can’t just look at the rate each state charges; you have to look at how it’s collected – the exemptions and so on. So to compare effective income tax rates, what you do is look at the total amount of income taxes paid and divide it into the total income and that gives you the effective income tax rate. When you do that, Illinois’ is far and away the lowest rate in the country.

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