Economic Policy

Exploration of the intersection of policy and economic trends, public finance, and economic development

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IGPA Experts use cutting edge social science research methods to analyze public policy. Our independent evidence and analysis is non-partisan, data-driven, and based in the best academic scholarship available.
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Increasing the cigarette tax

Authors

This report estimates the revenue and distributional effects of increasing the state’s cigarette excise tax by $0.50 per pack from $1.98 to $2.48. After taking into account the behavioral responses of smokers, Reif estimates that the tax increase would raise up to $175 million per year and reduce Medicaid expenditures by almost $1 million per year. The amount of revenue generated depends on the extent to which a tax rate increase would boost tax avoidance in large border cities like Chicago.


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The sales tax

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In Illinois, the sales tax ranks second in terms of state tax receipts, just after the individual income tax. Illinois’ 6.5 percent sales tax rate is relatively high compared to other states (though some of the collected revenue is returned to local governments). However, when local sales taxes are included, many Illinois locations have some of the highest overall sales tax rates in the nation.


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(.PDF 368.6 KB)

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Business taxes

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Business taxes are often a point of debate in discussions about raising state revenue. Like other taxes, business taxes have implications for administrative efficiency, vertical equity (“fairness”), economic efficiency, and revenue stability. Business tax burdens most often fall on the firm’s owner(s), its customers, its suppliers, or its employees.


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(.PDF 453.75 KB)

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The personal income tax

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  • Therese J. McGuire

The personal income tax in Illinois is the single largest revenue generator for the state ($18.3 billion in 2013). The state imposes a single tax rate of 5 percent regardless of the level of taxable income. In this paper, Therese McGuire presents a brief history of the tax, analyzes the tax using economic principles, describes various policy levers available to decision makers, and evaluates two policy package options in terms of their revenue potential and their capacity to contribute to other policy goals.


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(.PDF 398.53 KB)

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Making the 2011 tax increase permanent

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In January 2011 Illinois temporarily increased the personal income tax rate from 3 to 5 percent and the corporate rate from 4.8 to 7 percent. In January 2015 the personal rate will fall to 3.75 percent and the corporate rate to 5.25 percent. If rates fall as scheduled, the state will have to find other ways to raise revenue or cut spending to cover an anticipated shortfall of about $5 billion each year.


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(.PDF 471.32 KB)

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The "do nothing" option

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The state of Illinois has been on a perilous fiscal course, plagued by annual deficits with no end in sight. Most observers believe that reforms are necessary, but some suggest that the state can continue on the same path without major changes.


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Competing goals of budget reforms

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The short papers in the Illinois Budget Policy Toolbox are intended to analyze the pros and cons of alternative tax and spending reforms that help bring the Illinois state budget deficit towards balance.


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(.PDF 391.24 KB)

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Overview of the economic and fiscal situation in Illinois

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Despite enormous recent challenges, Illinois’ economy remains relatively healthy compared to other states. In recent recessions, Illinois has a pattern of doing worse than the national average and recovers slowly. Unfortunately, the recession that began in December 2007 and ended in June 2009 hit both the nation and Illinois exceptionally hard, and Illinois’ recovery has lagged the nation’s recovery in profound and disturbing ways.


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(.PDF 649.01 KB)

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Efficiency and distributional effects of Illinois gas taxes

Authors

  • Kaveh Nafari

The current fiscal crisis in Illinois affects all parts of the state’s budget. Infrastructure is no exception. For many years Illinois has spent more on highways than it has collected in highway-related revenue. One solution to this problem is to increase the state’s gasoline tax. This report discusses the efficiency and distributional effects of increasing the state’s gas tax, and also compares a gas tax increase to alternative solutions such as increased use of tolls.


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(.PDF 595.55 KB)

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Wind power: An opportunity for illinois

Authors

  • Maarten Vrouenraets

The U.S. Clean Power Plan will require states to reduce carbon emissions significantly by 2030. The mandate allows states to decide how to reach this target. Rather than relying on coal-fired power plants, Illinois can build natural gas plants or invest in renewable technology like solar, geothermal or wind. The state’s geography and climate give Illinois a special advantage in the use of wind power.


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(.PDF 685.09 KB)

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