The report on Illinois income tax, sales tax, and other tax revenues in the third month of FY23 comes from the Commission on Government Forecasting and Accountability (CGFA) points to inflation, exacerbated by a tight labor market, as continuing factors in the growing challenges facing the economy of Illinois. With inflation lowering the value of cash on deposit in financial institutions, interest rates continue to increase. Short-term interest rates are now at the highest levels since just before the financial crash of 2008-09. Rates charged by lenders for mortgages, credit cards, and other forms of consumer debt are increasing in line with this overall trend.
The State of Illinois continues to enjoy tax receipt trends that are based upon these overall nationwide and worldwide factors. With labor in short supply, pay rates and State income tax collections are increasing, further driving up consumer prices. On a year-over-year basis, Illinois personal and corporate income tax collections increased by $361 million in September 2022. Many consumers are rushing to stores to buy things before prices go up further, and sales tax collections were up $51 million in September 2022 as compared with the year-earlier period. The overall increase of $412 million from these two sources, income taxes and sales taxes, accounted for all of the overall changes in Illinois’ general funds revenue picture during the recently-concluded 30-day period. Other changes to collections and outflows in excise taxes, federal funds movements, and tax refunds and revenue sharing also took place, but did not add any net new money for the State.
With global interest rates rising, changes in Illinois employment and income tax collections are highly possible. The State’s tax revenue picture could worsen at any time. The CGFA September 2022 report was released on Tuesday, October 4.