From the Land of Lincoln to the Land of Taxes: The Proposed Illinois Income Tax Increase

I have lived, worked and paid taxes in Illinois -- specifically in the Chicagoland area -- for nearly six years now. Yes, the state that is about as close to fiscal insolvency as you can come due to irresponsible spending, poor planning, and a seeming lack of ability to cut expenses. Between the state and the city of Chicago, a toll road and city parking meters have already been leased out, new gambling venues may be in the works, the state lottery is advocated by way of ridiculously senseless (yet somehow catchy) television advertisements, and the politicians are always on the lookout for new and creative ways of bilking their residents out of a little more money.

This time however, the state has stuck to a time tested and certainly uncreative money making idea - raise taxes. How boring! But the excitement grows when Land of Lincoln livers discover that the state income tax increase would be to the tune of 67% (lawmakers initially wanted a 75% increase) over the current 3% rate. So those of us living in Illinois may soon be looking at a 5% state income tax rate, which sounds reasonable until you start adding up all the other taxes we have to pay for the wonderful opportunity to live in this fine state (if you can't tell, the sarcasm is literally flowing out of me like the corruption flows out of Chicago).

But give me a chance to explain exactly why I'm more than just a little fed up with living in Illinois and paying their outrageous taxes in order to do so.

What My Dollar is Worth in Cook County, Illinois

So let's say I make a whole dollar this week in income (which is about all I make anyway as a freelance writer). Paired with my wife's income we sit at about a 15% federal tax rate when everything is said and done. That takes my dollar down to 85 cents.

Add in another 7.65% taken out for social security and Medicare and that dollar is now down to 77.35 cents. Remember -- we're only dealing in taxes here, so we won't account for health insurance or retirement savings being drawn from that lowly dollar.

Now I recognize that none of this has to do with Illinois tax yet, and that so far, just about everyone else who is reading this article may be in about the same bucket as me when it comes to their federal taxes. However, keep reading and you'll see where Illinois really starts to sock it to me.

So now we move to the state level. If the new income tax rate ends up being passed, that sucks another 5% in state tax out of my dollar, bringing it down to 72.35 cents.

And now for one you might not be expecting. For every dollar I earn, approximately 7% of that dollar gets put toward my yearly property taxes. This is after a homeowner's exemption is applied to the tune of about $800 (an exemption that is set to decrease next year). So now my dollar is down to 65.35 cents -- but we're not done yet.

Now I'm ready to spend my dollar...or at least what's left of it.

Heading to the Store

After my dollar has taken its initial tax beating at the hands of the federal and state governments, it's time to prepare it for a little more savagery by going to the store to purchase necessities that will be taxed by the county. This month I need a new pair of pants. Thankfully my wife and I do the majority of our shopping in stores located in a neighboring county with a slightly lower tax rate.

This means we only pay 8.25% for most of our retail purchases, which is lower than the Cook County rate, and lower still than shopping in the heart of the City of Chicago itself. Still, it hurts my poor dollar by whittling its purchase power down to 57.1 cents. If I had chosen to buy food this week instead of pants, my tax rate would only have been 1.75% on my food purchases, leaving my dollar's post tax total at a hearty 63.6 cents.

So hopefully you see my frustration in living in a place where my dollar's purchase power in nearly halved by governments (federal, state, and local combined) that seem fixated upon ineptitude and inefficiency when it comes to spending my money.

You might want to take a minute to figure just how much you're paying in taxes each year. You could be surprised at just how much is being sucked out of your wallet when you start to consider all of the various taxes and rates that apply to you.

Disclaimer:

The writer is not a licensed tax advisor or financial professional. The information provided in this article is for informational purposes only and does not constitute legal, financial or tax advice. Any action taken by the reader due to the information provided in this article is solely at the reader's discretion. All calculations were performed to the best of the author's knowledge and have not been verified.