Illinois is the least tax-friendly state in America, and Iowa isn’t far behind.
That’s according to the 2019 Tax Map from Kiplinger, which examines state and local taxes on income, sales, property and gas, among others.
Illinois ranked first in Kiplinger’s list of least tax-friendly states, due in large part to its high property taxes. Iowa ranked ninth.
Because the report relied on a hypothetical couple with an income and property valued far above the medians in Illinois and Iowa, the results are not necessarily representative of the average taxpayer. Still, it sheds light on tax discrepancies between the states.
“The state's 4.95% flat income tax rate actually isn't that high when compared to other states,” the report said. “But it goes downhill fast for Illinois residents when you look at all the other taxes they have to pay.”
Citing property taxes in Illinois as the “second-highest in the nation,” the report also faulted high sales taxes, high wireless cellphone service taxes, high gas taxes and the estate tax.
“Illinois' economic woes are one reason why the Prairie State tops our list of the least tax-friendly states in the country,” the report said. “The state ranks No. 50 in the latest ranking of states' fiscal health by the Mercatus Center at George Mason University, and residents are paying the price with higher taxes.”
For Iowa, which ranked in the top quintile, the report cited average property taxes as 12th-highest in the nation.
The report also mentioned Iowa’s inheritance tax on estates worth at least $25,000. Rates run from 5% to 15%, and some inheritors are exempt.
“One reason why income taxes are on the high end in the state is because over 200 school districts and Appanoose County add their own income taxes on top of the state-level tax,” the report said.
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Other Midwestern states scored similarly. Wisconsin ranked No. 4 on the list of least tax-friendly. Nebraska ranked No. 6, Ohio ranked No. 8 and Kansas ranked No. 10.
The only Midwestern states to rank as “tax-friendly” were South Dakota, at No. 7 most tax-friendly, and North Dakota, at No. 8.
The most tax-friendly state is Wyoming, followed by Nevada and Tennessee, according to the report.
Still, the results are not necessarily representative of the average taxpayer. The report’s methodology involved filing tax returns for a hypothetical married couple with two children, an earned income of $150,000 and qualified dividends of $10,000.
To calculate property taxes, the report assumed the couple lived in a residence with an assessed value of $400,000 and each state’s average tax rate.
These income and property values are significantly higher than state averages, according to figures from the U.S. Census Bureau. In Iowa, the median household income was $56,570 in 2017. The median value of owner-occupied housing units was $137,200.
In Illinois, the median household income was $61,229 in 2017. The median value of owner-occupied housing units was $179,700.
High taxes are frequently cited as a reason why the Illinois Quad-Cities are losing residents to Iowa, though evidence is mixed.
According to analyses by the nonpartisan Tax Foundation, Illinois income taxes tend to be lower than in Iowa, while property and sales taxes tend to be higher.
In Iowa, the reverse tends to be true, though many exceptions exist in both states.