(The Center Square) – A new study that the authors say is intended to enable policymakers, taxpayers and business leaders to gauge how their states’ tax systems compare gives Illinois a poor ranking.
The Tax Foundation has released its annual State Tax Competitiveness Index, which compares each state on more than 150 variables in five areas of taxation: corporate taxes, individual income taxes, sales and excise taxes, property and wealth taxes, and unemployment insurance taxes.
The authors said states landing near the bottom of the rankings tend to have several issues in common: complex, nonneutral taxes with comparatively high rates. They typically have high and progressive income tax rates; impose harmful gross receipts, capital stock, and bequest taxes; penalize capital investment through poorly designed corporate taxes; and have ill-structured sales tax bases that include a disproportionate share of business inputs.
Illinois ranked 37th overall and near the bottom in the corporate, unemployment insurance and property tax categories.
Senior Policy Analyst Andrey Yushkov said Illinois ranks 13th in individual taxes, but if the so-called “millionaires tax,” which was approved by voters in a non binding question on Election Day, is put into place, the state will slip in the rankings.
“If this additional 3% surtax on millionaires is ultimately implemented and the constitution of the state is changed, then we’ll detrimentally affect the tax competitiveness in this particular category,” said Yushkov.
According to the study, the top three tax-friendly states are Wyoming, South Dakota and Alaska. New York came in last place, followed by New Jersey and California.
“The index rewards states for structurally sound, pro-growth tax policies, making it a useful tool for policymakers who want their states’ tax systems to be welcoming to business and human capital,” said Yushkov.
