Federal Income Taxes for Illinois Workers

Frank Manzo IV is the Policy Director of the Illinois Economic Policy Institute (ILEPI). Visit ILEPI at www.illinoisepi.org or follow ILEPI on Twitter @illinoisEPI.

A July 8, 2014 Economic Commentary by the Illinois Economic Policy Institute investigates the effective tax rates paid by Illinois workers across occupations. The study– Illinois Federal Income Taxes: By Occupation, 2011-2013 [PDF]– finds five key takeaways:

  1. The majority of workers in Illinois (60 percent) pay federal income taxes;
  2. The average effective federal income tax rate for all Illinois workers is 13 percent (but 21 percent for only those workers with any federal income tax liability);
  3. The average effective income tax rate is 17 percent for CEOs of Illinois firms and 18 percent for the rich;
  4. Teachers pay an average effective federal income tax rate of 22 percent (the average for all public sector workers in Illinois is 17 percent); and
  5. Despite earning significantly less money, many workers in Illinois– such as registered nurses, community and social services workers, and employees in sales occupations– face similar average tax rates as CEOs and the rich.

Clearly, various tax credits, loopholes, and accounting tactics continue to challenge the actual progressivity of the system in practice.

The report comes at a time when a wealthy candidate for Illinois governor was found to pay only about 18 percent in federal income taxes from 2010 to 2012, and has refused to release his complete 2013 income tax returns with schedules. There is no way to know how he was able to reduce his income tax burden so significantly unless the full returns are released.

We do know that, at 17 or 18 percent, Bruce Rauner is paying less in taxes than the average Illinois worker with a federal tax liability (who face a 21 percent burden), less than teachers on average (22 percent), less than workers in sales on average (19 percent), and about the same as all public sector workers across Illinois (17 percent). Through loopholes and other accounting methods, Mr. Rauner is shifting the tax burden from people with the greatest ability to pay onto the backs of working families.

The Illinois Economic Policy Institute works to improve transparency and accountability in government. It is in the public interest that both Mr. Rauner and Governor Quinn release full tax records from the past several years. Only then can Illinois residents fully evaluate the claims of each candidate.

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