State Income Tax Vs. State Sales Tax in Illinois
The two main sources of income that finance government operations in Illinois are the income tax and the sales tax. The income tax is levied against Illinois residents and is a percentage of annual earnings. Sales taxes are levied on retail transactions, including big ticket items, like cars, and smaller items, such as paper towels.
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Income tax
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Illinois individual income tax, pegged at 2.5 percent, was put in place in 1969. It was increased to 3 percent on a permanent basis in 1993. Illinois is among just nine states that have a flat income tax rate. Other states charge graduated rates that generally tax wealthier incomes at a higher rate.
Sales tax
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The state’s first sales tax was first imposed in 1933 at a rate of 2 percent. The rate is now 6.25 percent, but 20 percent of the revenue from the tax is distributed to local governments. In some communities, the sales tax rate is even higher because of additional local taxes applied to purchases.
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Revenues
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In the fiscal year that ended June 30, 2010, the state’s personal income tax generated $9.4 billion. That’s down from $11.1 billion recorded two years earlier. The steep drop is blamed on the national economic downturn. The state collected $6.3 billion in sales taxes during the same period, which also is a drop from previous years.
Exemptions
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There are exemptions for both the income and sales taxes in Illinois . Each taxpayer receives a $2,000 personal exemption. Taxpayers who are at least 65 or blind receive an extra $1,000 personal exemption on their income taxes. Items that are exempted from sales taxes include certain medicines food.
Efforts to change
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Facing a steep drop in revenue due to the national economic downturn, Gov. Pat Quinn, a Democrat from Chicago , announced in 2009 that he wants lawmakers to boost the income tax rate to 4.5 percent. The Democrat-controlled Senate approved a tax hike, but the Democrat-controlled House has not gone along with the proposal. In 2010, Quinn did manage to push through a plan to offer shoppers a break on back-to-school purchases by waiving the state sales tax on certain purchases during a week-long stretch of August.
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References
- Photo Credit illinois outline image by Kim Jones from Fotolia.com
