IIPF Director and Affiliated Faculty on IGPA Team Examining Alternative Structures for the Illinois Personal Income Tax
IIPF Director Dr. Kenneth Kriz and IIPF Affiliated Faculty members Patricia Byrnes and Glenn Cassidy were co-authors of a report for the Illinois General Assembly released on May 7, 2019 by the Institute of Government and Public Affairs, a University of Illinois System Institute chartered to provide non-partisan, evidence-based research and practical programs to engage leaders and inform policy in Illinois.
From the IGPA Press Release:
“IGPA [seeks] input from public policy leaders about what research topics would be most relevant. Illinois Senator Andy Manar reached out to IGPA seeking information about Illinois’ personal income tax system. “The Institute of Government and Public Affairs provides independent, rigorous and nonpartisan research that helps to inform important policy discussions. We’re glad Senator Manar reached out with these relevant questions, and we look forward to working with our scholars and other policymakers to help inform the conversation,” IGPA Interim Director Jon S. Davis said.
The questions the report seeks to answer are:
- Can you describe the income distribution in Illinois and how this has evolved over the recent past?
- Can you project out the income distribution in Illinois for the next five years and project personal income tax revenue with:
- Illinois’ current personal income tax system?
- A graduated rate personal income tax system comparable to other Midwestern states (e.g. Wisconsin, Minnesota, Iowa or Missouri)?
- What personal income tax revenue would Illinois’ economy generate if it adopted the personal income tax structure of Wisconsin, Minnesota, Iowa or Missouri?
- How are tax burdens distributed in the current tax system and how would they be different under alternative tax systems of the states listed above?
Although the questions were developed in conjunction with Senator Manar, he played no further part in the research, analysis or writing of the report. The report represents the non-partisan, evidence-based analyses of experienced and independent University of Illinois scholars.
Some key findings the report makes in answering these questions include:
- Income inequality has been rising in Illinois since the late 1970s and has mirrored the increase in inequality at the national level.
- High-income households are expected to receive a greater share of income over the next five years, but the pace of the increase will be smaller than in recent history.
- The share of income going to those earning the least is forecast to fall initially, but then level out, and eventually rise slightly.
- Changes in the income distribution over the next five years will have little effect on the revenue generated by the Illinois’ personal income tax system.
- Compared to Wisconsin, Minnesota, Iowa or Missouri, Illinois’ tax system collects less revenue than every state, except Missouri, and the revenue Illinois does collect comes disproportionately from the lowest-income taxpayers.
- Allowing for possible behavioral changes from taxpayers in response to tax-policy changes does not alter these conclusions.”
The report can be downloaded from the IGPA website at https://igpa.uillinois.edu/report/revenue-implications-tax-structure