Taxes on unemployment benefits helped improve Illinois’ revenue estimate

(The Center Square) – Taxes unemployed Illinoisans have paid on their unemployment benefits helped the state see improved revenues this far into the COVID-19 pandemic, according to the state’s forecasting commission.

Part of the process for crafting the state’s annual spending plan is determining what the revenue estimate is.

The Illinois Commission on Government Forecasting and Accountability met Tuesday in Springfield to provide their latest estimates.

COGFA Revenue Manager Jim Muschinske said when the pandemic hit, they anticipated major losses. With the latest data, the worst didn’t happen and the recovery has been swift.

“Depending on the sector we’re talking about, it may look like a V, it may look like U, it may look like a Nike swoosh, depending on what sector we’re looking at,” Muschinske said.

Consumers beat expectations on economic activity, Muschinske said. That’s despite the governor’s pandemic restrictions. But, as with other economic downturns, he expects Illinois to lag the nation in recovering.

“This has now been established for decades, it’s kind of the way things tend to work its way out,” Muschinske said. “It’s not that we don’t eventually recover, it just takes us longer.”

One indicator the state lags is the unemployment situation, which is still higher than the national average.

“Thankfully we’ve recovered approximately half of the jobs lost, but certainly there is a long way to go,” he said.

And while income taxes are down about 1%, the tax withholding from unemployment is way up, Muschinske said.

“Remember, unemployment benefits are taxable, okay,” he said. “You can see the dramatic shift. That actually is up 167% above the same period last year.”

For personal income taxes, COGFA estimates $23.6 billion for FY 22, down about $458 million from the previous year. Corporate income tax is estimated at around $3.2 billion, down $217 million from the year before. Sales taxes are estimated at $9.5 billion, up $168 million from the year before. Other revenues anticipated to be higher include liquor. Overall, COGFA estimates

COGFA estimates the state’s total revenue for the coming fiscal year based on current law will be $40.4 billion which is around $185 million more than the governor’s office estimates, when removing the governor’s proposals to end nine different tax incentive programs to the tune of $930 million.

Disclaimer: This content is distributed by The Center Square