More than 2.4 million Illinoisans give to charitable causes every year. They support over 80,000 nonprofit organizations in the state from food banks and homeless shelters to local churches and youth support groups.
Illinois state policymakers are pursuing a tax agenda that puts this vital community support at risk. Earlier this year, the Illinois senate passed a bill (SB 2412), which was then endorsed by the governor, that puts an important tax question up for public vote. This coming November, voters in the Prairie State will be asked:
“Should the Illinois Constitution be amended to create an additional 3% tax on income greater than $1,000,000 for the purpose of dedicating funds raised to property tax relief?”
To understand how this proposal is likely to harm charitable giving in the state, we need to review the breakdown of charitable donations by income level. Illinoisans collectively donated $10.44 billion to charitable causes in 2021, or roughly $4,325 per Illinois donor. However, high-income individuals gave a significant proportion of this total.
Specifically, about 30,000 Illinois who make more than $1 million (the group being targeted by this new tax proposal) gave about $6 billion to charity in 2021, or almost 60% of all charitable donations. This high-income group of Illinoisans generously donate an average of $200,000 to charitable causes each year.
Illinois is already the biggest net loser when reviewing the migrations of high earning individuals among the 50 states. For every 43 high income households that move to Illinois, 100 high income families flee the state. An additional tax burden on this mobile group may accelerate this trend, further eroding an essential component of the charitable giving base.
As Illinoisans weigh the question of applying additional taxes on high earners, they should carefully consider the unintended consequences of raising the tax burden. The proposed tax increase could significantly impact charitable giving in the state, potentially reducing the resources available to nonprofit organizations that provide crucial services to communities across the state.
