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Was the pandemic to blame for Illinois state revenue weakness before the latest federal stimulus bill?

March 15, 2021

The massive $1.9 trillion federal ‘stimulus’ packaged signed into law last week included $350 billion for state and local governments. At the onset of the pandemic, many feared already-challenged jurisdictions were going to take a huge revenue hit.

A few weeks ago, however, an office of Illinois government released a little-noticed but remarkable report including the most recent data on revenue trends in Illinois government. The report featured a lead article about the impact of the pandemic on gaming revenue, discussing a ‘severe’ pandemic-induced decline.

But the most remarkable statistics in the report were those contained in the fiscal year-to-date totals for tax revenue. In the eight months ended February 2021, total state tax revenue rose 10% over the same year-earlier period, despite the fact that the year-earlier period ended a month before the arrival of the pandemic. The increase in tax revenue was led by personal income taxes as well as corporate income taxes.

Timing changes for payments were argued to be partially responsible for the year-over-year increase. But looking over the past four years, personal income tax revenue in Illinois in that eight-month period rose from $12.5 billion in 2018 to $13.1 billion in 2019, to $13.8 billion in 2020, and then to $15.6 billion in 2021. Corporate income tax revenue almost doubled over that same period. Sales tax revenue grew at a more moderate pace, but it was still growing amidst Illinois’ population decline.

Illinois’ state government dug itself into a huge financial hole over decades. Any argument Illinois needed massive new federal ‘stimulus’ or ‘relief’ spending in the bill passed last week can’t rely on claims of pandemic-induced revenue weakness alone, however.

Illinois' tax revenue was going up, not down, during the pandemic.


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