I presume it will not surprise you that Kiplinger has rated Illinois the least tax-friendly state in the nation. Marketwatch reports:
This week, the personal-finance publication Kiplinger’s released its list of the most — and least — tax-friendly states in America. To draw its conclusions, it used a hypothetical couple with two kids and $150,000 in income a year plus $10,000 in dividend income, and then looked at the income-, property- and sales-tax burden that family would face.
Illinois took the No. 1 spot on the list, thanks in large part to its high property taxes. The Land of Lincoln was followed by Connecticut and New York, both of which have pretty high-income taxes.
Illinois has no equivalent to California’s Prop. 13. Homes are reassessed triennially and there is no limit on the amount of tax relative to the value of the property. Property taxes in Illinois have reached confiscatory levels. Property taxes are taxes on middle class wealth: by and large the poor don’t own their own homes (although high property taxes are reflected in their rents) and the rich hold most of their wealth in something other than their homes. Not only are they regressive they are particularly unjust, taxing people on incomes they have not received.
Naturally, our newly-elected governor wants to make Illinois more attractive by imposing a graduated income tax.
I just compared my property tax rate to a random Chicago area zip code and the Windy City is three times greater. Crazy.
I assume the typical Illinois family of four with $10k in annual dividend income subscribes to Kiplinger and lives for tax purposes in South Dakota.
Dave
I was told that IL is considering taxing retirement accounts. Essentially a wealth tax. I couldn’t believe it as retirement accounts are generally sacrosanct, politically and legally. Any knowledge of this?
“Not only are they regressive they are particularly unjust, taxing people on incomes they have not received.”
But you miss the key point. They are derived from illiquid assets that also have very big switching costs. Politicians love them.
Bend over.
@Guarneri: Pretty sure most states tax retirement accounts or tax them above a certain level. I assume going to a graduated tax (such that typical retirement benefits would be exempt) would make that easier in Illinois, but I don’t think there is any specific proposal right now.
Here in Colorado, there’s a retirement income exemption up to $24k per person per year that covers basically any type of retirement income.
Colorado has TABOR in the Constitution, so tax increases are very, very difficult to get passed here.
PD
Maybe I wasn’t clear. Not a tax at withdrawal or a penalty for late withdrawal, but a tax each year on the principal balance. Since lines from Mafia movies are popular recently. 401k? 50 yrs old? FU, pay me….. (Goodfellas).
Dudes: Government creates money, so it belongs to them. They just loan it out to you at favorable rates.
@Guarneri: Ok, I understand now. No, I’ve not heard about taxing the principal balance. The notion of taxing retirement income seemed to have come up last year then disappeared.