Illinois Ranked as Highest-Taxed State in the Nation

Illinois has earned the distinction of being the highest-taxed state in the country, according to WalletHub’s latest annual study on state tax rates. The study, which compares all 50 states and the District of Columbia, highlights the growing financial strain on Illinois families and businesses due to the state’s high tax burden.

WalletHub’s analysis evaluates states across four key tax categories: real estate, vehicle property, income, and sales excise taxes. Illinois ranked 51st overall, making it the most heavily taxed state. The state placed 50th in real estate taxes and 47th in income taxes, underscoring the financial challenges residents face.

Illinois' real estate tax rate stands at nearly 8%, second only to New Jersey and well above the national average. The report also found that Illinois' overall tax burden is 51.8% higher than the U.S. average, with New York trailing as the next closest state at 34.9%. Meanwhile, states such as Alaska, Delaware, and Wyoming impose the lowest tax rates, fostering more favorable economic conditions.

A separate WalletHub survey found that while 70% of Americans are more concerned about inflation than taxes, nearly one-third of respondents said they would rather serve on jury duty than file their taxes. For Illinois families and job creators, the state’s tax burden continues to exacerbate economic uncertainty.

With Illinois facing the highest tax rates in the country, discussions about potential reforms and relief measures are expected to remain at the forefront of political and economic debates. And with just days remaining in the spring legislative session, some lawmakers are sounding the alarm about the possibility of even higher taxes on the horizon.

“We only have a handful of session days left before the General Assembly is scheduled to adjourn, and we still haven’t seen a budget proposal from our Democrat colleagues,” said State Representative Mike Coffey. “On top of that, the Governor’s Office of Management and Budget lowered revenue projections for FY26 by more than $500 million last week. House Republicans will continue to stand for fiscal sanity. We will not negotiate a budget with ANY tax hikes.”

Among the proposals raising concerns is a new sales tax on services being circulated in Springfield. The measure would impose sales tax on dozens of everyday services including haircuts, dry cleaning, streaming services, landscaping, vehicle repairs, pest control, and more. The new tax is being proposed as a bailout to address the nearly $1 billion budget shortfall facing Chicago’s mass transit system in 2026.

Over 73% of Illinois' economy is composed of service-producing industries—most of which are not currently set up to handle the added complexity of sales tax collection. Critics warn that rushed implementation would drive many small businesses out of the state.

“Proposals of raising taxes again on working families is outrageous when our state is in dire need of policy reform that offers taxpayers relief,” said Coffey. “We must set better priorities and pass legislation that keeps families in Illinois so they can prosper, and not be burdened by high taxes.”

Dean Graven, owner of Dean’s Landscaping and Handyman Services and a former president of the Springfield Home Builders Association, said the tax would directly impact housing affordability across the state.

“A new service tax will have a terrible impact on housing affordability in Illinois and will serve to stifle new construction rates,” said Graven. “Home builders rely on contractors and subcontractors providing services. Think of all the services that go into building a home – carpenters, electricians, plumbers, HVAC, roofers – under a new service tax, all of these additional taxes will be passed along to consumers. Let’s be clear, a tax hike on services is a tax hike on all Illinois families.”

More than eighty services are included in the proposal, ranging from car washes and dog grooming to retirement advising and moving services. A full list of affected services and a portal to voice opposition to the proposal is available at StopILServiceTax.com.