A new report shows from where Illinois state government gets most of its tax revenue.
The Pew Charitable Trusts has produced a breakdown of where tax dollars come from and it varies widely.
In Illinois, nearly 40% of tax dollars come from personal income taxes. Broad-based personal income taxes are the largest source of tax dollars in 33 of the 41 states that impose them, with the highest share in Oregon at over 63%.
States that don’t implement broad-based personal income taxes include New Hampshire, Tennessee, Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.
The second highest category of tax income for Illinois is general sales taxes at 24%, followed by selected sales taxes at about 18%, and corporate taxes at 10.3%.
Justin Theal, an officer with the state fiscal health project at Pew, said lawmakers should always have a good grasp on how a state’s tax system is set up.
“How states raise their tax dollars specifically is important for policymakers to understand since that illuminates the unique mix of tax sources that each state depends on to fund public services and accomplish policy goals,” said Theal.
Tax revenue is one factor that helps explain recent widespread state budget surpluses. According to the report, during the eight quarters ending in June, three-quarters of states took in enough tax dollars to offset their early 2020 pandemic losses by the start of this budget year.
Theal said lawmakers can use the information to plan for economic downturns like a pandemic.
“Policymakers should really keep how volatile each tax source is in mind when thinking about the overall size of the state’s rainy day fund,” said Theal.
Illinois’ rainy day fund has been depleted for years and was down to $60,000 in 2016. After a $320 million deposit earlier this month, it has been determined that the state could run its government on savings alone for about a week.