Quote:
Originally Posted by jtown,man
Yeah, living in Chicago and dealing with income taxes isn't a huge deal, I actually think the states flat tax is a really good selling point.
When you want to buy a property and realize that 25% of your costs will be taxes each month, that's the issue. Also with a sales tax at above 10%, there is literally nowhere for the tax to go. What if we want to raise taxes for transit? Not going to happen. We are all topped out.
So the tax situation overall is poor but not horrible. Maybe the state could continue to improve its credit rating, lower property taxes and sale taxes while slightly raising the income tax rate to maybe a top rate of 8% or something.
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I agree with some of this. Short form, Illinois is a definite bargain compared to high cost and income tax states such as NY (especially if coming from NYC) and California. I can speak first hand to this. It's not necessarily a bargain compared to very very low tax and very low cost states (like..South Dakota). However it could be more complicated than that (i.e. what happens if you get a job in somewhere like the Chicago area and relatively it pays so much that it makes sense to take it and also way better for your career trajectory than staying where you currently are, etc).
Now, long form of my thoughts - the income tax here is actually pretty competitive compared to
most states. Yeah it's not 0% like a handful of states but it's actually relatively low. Things get paid for somehow, so you can see in Texas for example that their property taxes are actually among the top 3 highest in the entire country. Eventually something gives. But Illinois, especially for households making 6+ figures is pretty competitive even to states you wouldn't realize just looking at income tax alone. I had made a chart before for a $150K/yr household and even South Carolina and Arkansas had higher income tax rates.
Sales tax is high, but also that could be moot when you factor in the decently favorable income tax rate here compared to a state with a higher income tax even if it has a lower sales tax rate. Let's just say that you spend 10% of your gross yearly income on goods taxed at that rate (no, not all goods in Illinois are taxed at this rate FYI). We can take Virginia as an example vs. even Chicago with the high sales tax (10.25%). Virginia has a top income tax rate of 5.75% but its sales tax listed is only 5.75%:
Yearly income = $50,000
* State income tax in Illinois: $2,475
* State income tax in Virginia: $2,875
* Sales tax charged on $5000 of goods in Chicago (10.25%): $512.5
* Sales tax charged on $5000 of goods in Virginia (5.75%): $287.5
* Total state income tax + sales tax paid for Illinois/Chicago: $2,987.5
* Total state income tax + sales tax paid for Virginia: $3,162.5
In Virginia even with a sales tax that's 4.5 points lower than in Chicago on the same amount of purchase, you will still end up paying $175/year more in Virginia just because the income tax rate is a "measly" 0.8% higher in Virginia than Illinois.
Even if in this situation you said that because of COL, things are cheaper in Virginia and you spent 8% of your gross yearly income on goods instead of 10%, you'd still be paying $117.50/year more in Virginia of these 2 things combined.
If you did this for a household making $150K/yr then you'd be paying $352.5 a year more in income+sales taxes even with paying 8% of your gross income for goods in Virginia vs. 10% in Illinois.
The 2 things that set it over are property taxes and the cost of housing vs. your wages and that's obviously another situation. If you had things evenly, then the property tax situation overtakes the above anyway. I do agree that the property taxes are too high and should come back down. Of course, some properties get taxed more favorably than others.
In my personal situation, we moved from NYC which has higher income tax (~10% for us), higher housing costs, but lower property taxes and lower sales tax. I moved to Chicago with my NYC salary and they didn't adjust it down due to my level in the company especially. Even so, some of the levels' difference between NYC and Chicago is only $10K or $15K difference, but the housing prices in NYC are literally 2-5X higher per square foot (sometimes even higher if you're going to a REALLY cheap Chicago neighborhood) than in Chicago. We are closing soon on a property in Chicago that is not objectively cheap and is an amazing luxury condo. Almost like a dream of mine to own a place like this. But it was completely out of reach in NYC and even many suburbs despite us making a bit of money per year. It's in Lincoln Park but still less per square foot than what some 30+ year old condos in fairly industrial working class areas and not sought after parts of Queens cost.
In our situation, what we save in income tax by moving to Chicago is not much less than the property tax in our new place. However again what we're buying is not cheap - that was our decision even though we could have bought a place for half that amount or even less. In that situation if we did spend less then we would be paying less even with the higher income taxes here. Even so, the cost of housing is so much where we came from that even if we did stay with our needs, we'd probably be spending minimum of what we are here in NYC for a much worse quality place.
Case in point - I think Chicago is still attractive for people from higher COL areas especially with higher taxes like NY, parts of NJ, and CA. It may also be pretty attractive for people with similar income taxes and lower property taxes, but way higher housing costs (i.e. Boston). You have to always factor in how much less your mortgage (or rent) payment would be for something similar. If you were paying a $3000/mo mortgage for a place in one location but in Chicago you could get a similar property with a $1500/mo mortgage then even with an increase of property taxes, you still may overall save money in the move regardless of the higher property taxes.
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