Illinoisans Have Highest Tax Burden In The Country: WalletHub

ILLINOIS — With an effective rate of more than 15 percent, Illinois ranks 51st in the nation — dead last out of all 50 states plus the District of Columbia — for state and local tax burden. At the same time, Illinois ranks in the middle of the pack for taxpayers' return on their investment.

That's according to personal finance website WalletHub, which totaled real estate, vehicle property, income and sales and excise taxes to come up with its rankings. The lowest state and local tax burden in the nation was 5.84 percent in Alaska.

Here's how the categories break down in Illinois:

• Average real estate tax: $4,942, rank: 50
• Effective vehicle property tax rate 0 percent, rank: 1
• Effective income tax rate: 2.9 percent, rank: 13
• Average income tax paid: $18,34, rank: 39
• Effective sales and excise tax rate: 4.29 percent, rank: 27
• Average sales tax paid: $2,712, rank: 25
• Effective total tax rate: 15.01 percent, rank: 51

The average Illinois household pays nearly $9,500 in state and local taxes every year, with Illinois' gasoline taxes pushing the state to the top. Illinois doubled its gas taxes in 2019 and has the third highest in the country.

State and local tax burden by state:

RELATED: A Year After Doubling, Illinois Gas Tax To Increase Annually

Illinoisans making less than $25,000 pay more of their income in taxes than those making around $50,000 or more than $150,000, the website found. Low-income residents pay about 13 percent of their income in taxes, while middle-income residents pay 11.71 percent and high-income residents pay 11.01 percent.

Votes in the state declined to approve a graduated income tax last year that would have lowered taxes on lower-income Illinoisans and raised taxes on those making over a quarter million dollars a year.

"It's wrong that I would pay the same tax rate as someone earning $100,000 or, even worse, pay the same tax rate as someone earning $30,000," Gov. J.B. Pritzker said at the time, warning of cuts to services or tax hikes on everyone if the measure didn't pass.

But critics said they didn't trust state lawmakers not to squander the money, pointing to high-profile corruptions allegations against Illinois House Speaker Mike Madigan and others as proof lawmakers couldn't be trusted.

Surprisingly, states with low income taxes don't always pay lower taxes overall, the report found. For example, Washington state has no income tax, but residents pay an effective 8.65 percent sales tax, bringing their total tax burden to nearly 12 percent. Texas' total effective tax rate is even higher, despite having no income tax and a lower sales tax — the Lone Star State has some of the highest real estate taxes in the nation.

Red states — those that voted for Donald Trump in the 2020 presidential election — typically pay lower taxes than states that voted for the Democratic candidate. But blue states don't always see better government services as a result of higher taxes, Wallethub found.

The website ranked all states, plus D.C., in five categories: education, health, safety, economy and infrastructure and pollution.

Here's how Illinois ranked in those categories:

• Education: 19
• Health: 23
• Safety: 23
• Economy: 26
• Infrastructure and pollution: 31

WalletHub found that better services depend on much more than simply paying more taxes. States with the best return on investment, or ROI, include Florida — with one of the lowest state and local tax burdens in the country — but also Nebraska, with one of the highest.

Taxpayer ROI by state:

Rebecca Hendrick, a professor of public administration at the University of Illinois at Chicago, told WalletHub that many states with low tax burdens — Alaska, North Dakota, Texas and Oklahoma, for example — rely on external sources of income, such as taxes on oil and gas drilling, to make up for lower taxes on residents, while most local governments don't have that luxury.

"Governments such as Detroit, Flint, East St. Louis, Newark, Buffalo, and many more small governments throughout the U.S. have very low capacity to generate their own revenues," she said. "I would describe 6-10 suburban governments in the Chicago metro area as insolvent due to a decline in population, property values, economic base, etc. Their tax burdens are quite high and service levels and quality are low because they cannot generate the revenues necessary to provide adequate services. On the other hand, governments with a wealthy economic and tax bases may have higher tax burdens because their citizens demand it and are willing to pay for it. Their high tax burdens do finance better government services."

Hendrick said lack of oversight and infighting among elected officials increase costs and lead to the waste of taxpayer dollars. She also criticized lawmakers for increasing tax burdens without increasing services.

"They do this by pushing current obligations onto future taxpayers, such as underfunding pension obligations, not adequately maintaining existing infrastructure, and what is called 'scoop and toss' of current debt obligations to the future (through refinancing old debt)," Hendrick said. "This means that current taxpayers are paying for prior obligations, which reduces what is spent on current services."

Red states also receive more money from the federal government than blue states. For example, from the first COVID-19 relief package passed over the summer, Wyoming received $1.25 billion — about $1.2 million per positive case, or about 80 percent of its annual budget, according to the Associated Press — having fewer than 600 positive cases at the time, while Illinois received less than $100,000 per positive case.

Other federal support to states comes in the form of federal contracts, grants and public subsidies.

Illinois was one of the least dependent states on the federal government, according to WalletHub. The states most dependent on the federal government include Alaska, Montana, West Virginia, Mississippi, Kentucky and New Mexico.