Metro-East News

Of Illinois and Missouri, which has higher taxes? You might be surprised.

There has long been a perception that taxes in Illinois are higher than they are in Missouri, but a recently-released study paid for by real estate organizations found the total tax burdens are about the same on both sides of the St. Louis area.

In the study conducted by John Foster, an assistant professor in the Department of Public Administration and Policy Analysis at Southern Illinois University Edwardsville, the tax burdens are roughly equal between Illinois and Missouri in the St. Louis metro area, when looking at the combined burdens of property taxes, income taxes and sales taxes, as well as various tax credits or deductions people can claim.

The study was paid for by the Illinois Realtors, the Greater Gateway Association of Realtors and the Realtor Association of Southwestern Illinois.

“We wanted to conduct the study to see if the popular perception was true that the Illinois side of the metro area was way over-taxed, or if the overall tax burden where all taxes are figured even the playing field in the region,” said Kyle Anderson, local governmental affairs director for Illinois Realtors.

In the privately-funded study, Foster found that Illinois residents pay 1.3 to 1.4 percentage points more in property taxes than those in Missouri.

Property taxes tend to be higher on the Illinois side. Property tax rates in Illinois are based on one-third the market value. In Missouri, it’s at 19 percent of the market value.

Illinois does have the homestead exemption, as well as exemptions for senior citizens, veterans and disabled people. Illinois also allows people with lower incomes to claim an earned income tax credit, as well as a property tax credit for homeowners on state income tax returns. Missouri doesn’t have a homestead exemption but allows homeowners to deduct mortgage interest and local real estate taxes on their state income taxes.

Missouri also allows localities to tax personal property, such as a person’s vehicle, trailer or boat.

“For most income levels, the total tax benefits from home ownership tend to be greater on the Illinois side,” Foster wrote in the study. “If mortgage interest were deductible under the Illinois state income tax, then the offsets available to Illinois would exceed those available to Missouri homeowners by an even larger margin.”

For most income levels, the total tax benefits from home ownership tend to be greater on the Illinois side.

SIUE Associate Professor John Foster

Foster found that sales tax burdens on the Missouri side were slightly greater than in Illinois.

Illinois’ income tax rate of 3.75 percent is lower than Missouri, which has graduated income tax rates, leading to those with higher incomes paying higher rates. The city of St. Louis also has an earnings tax for people who live or work in the city.

“We need to portray ourselves in a different light,” Anderson said of the metro-east.

Anderson said looking at the data is vital to dispel the thought that Illinois’ total tax burden is higher.

“The goal is to remove the stigma that a family is going to face an overwhelming higher tax burden in Illinois,” he said.

Illinois Realtors commissioned the study to see whether the tax burden was truly higher on the Illinois side of the river.

“We all know Illinois struggles,” Anderson said. “Missouri has the same struggles.”

“Maybe taxation may not be the end of problems,” Anderson said. “We lowered taxes at the expense of police, schools.”

Anderson added local governments should try to encourage home ownership because it helps increase disposable income and stimulates the local economy.

“Home ownership everywhere is a benefit,” Anderson said.

He said incentives such as rent to own programs or assistance to buy property are helpful.

Rent in Missouri also tends to be more expensive, leading to their property tax burden to be higher.

“Because of certain taxes being higher in Illinois, our membership felt the popular perception was Illinois’ overall tax burden was higher,” Anderson said. “We simply wanted to see if this was true and found that the overall burden is pretty equal.”

Total tax burdens

Combined property, sales and income tax burdens (using Illinois’ 3.75 percent rate)

Income level

Illinois

Missouri

Illinois percentage of income

Missouri percentage of income

Percentage point difference

$20,000

$2,588

$2,855

12.94 percent

14.28 percent

1.34 percentage points

$50,000

$5,494

$5,227

10.99 percent

10.45 percent

0.53 percentage points

$75,000

$7,409

$7,364

9.88 percent

9.82 percent

0.06 percentage points

$100,000

$9,185

$9,030

9.19 percent

9.03 percent

0.16 percentage points

$200,000

$16,651

$17,323

8.33 percent

8.66 percent

0.34 percentage points

Source: Tax Burdens in the St. Louis Metropolitan Area: A Comparative Study

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