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Every dollar spent by government – and every job bankrolled by government – is made possible by the men and women who work in the private sector. Taxes on their productive activity pay the public sector’s bills. In essence, every private sector worker is responsible for not only his or her job, but also for the jobs in the state and local government workforce. As such, policymakers should make every effort to ensure that this burden is as small as possible.
It takes 21 Illinoisans working in the private sector to fund one Illinois state government job.
- In 2009, there were 154,732 state government workers in Illinois earning a combined $10,521,198,000 in salaries, wages and benefits which include payments to their pensions (see Methodology for a discussion of government employee counts and compensation levels). This breaks down to an average of $67,996 on a per job basis.
- As a result, it would take the sum of direct state taxes paid by a total of 3,189,700 private sector jobs to fund the Illinois state bureaucracy.
- This is equivalent to 65 percent of total private sector employee levels in 2009 (which totaled 4,938,356 employees).
At the local level, it takes 20 Illinoisans working in the private sector to fund one Illinois local government job.
- In 2009, there were 619,915 local government workers in Illinois earning a combined $36,169,759,000 in salaries and wages and benefits which include payments to their pensions. This breaks down to an average of $58,346 on a per job basis.
- As a result, it would take the sum of the direct local taxes paid by a total of 12,346,109 private sector jobs to fund Illinois’s local bureaucracy.
- This is equivalent to 2.5 times the total number of private sector employees in 2009.
These results may appear confusing at first glance. Keep in mind that this analysis is based on taxes that are directly paid by individuals and does not include taxes paid by businesses, taxpayers with higher than average incomes, revenue from matching federal funds (such as Medicaid) or taxes paid by non-residents or retirees. This exercise is meant to illustrate the simple concept that all money spent by government must first come from taxpayers the private sector and that government employees really are “servants of the people.”
Overall, Illinois’s state and local government employees earn $46,690,957,000, making it the largest industry classification in the state in terms of compensation paid. State and local government payrolls are larger than all other industry classifications just beating out the second largest industry in the state – Professional and Technical Services ($46,609,735,000). Government also ranks ahead of Manufacturing ($44,882,230,000), Health Care and Social Assistance ($40,466,640,000) and combined Wholesale and Retail Trade (45,492,935,000).
Additionally, Illinois’s 774,647 state and local government employees make it the second largest industry classification in terms of people employed, just trailing Health Care and Social Assistance (809,153). Yet, it is still larger than Manufacturing (595,183), Retail Trade (705,017), Finance and Insurance (498,012) and Construction (348,295).
Supporting this large government bureaucracy is a tremendous burden on the average private sector worker, and policy makers should seek to minimize this burden by implementing market-driven compensation packages and economical staffing levels.
In order to calculate the amount of taxes paid, this study utilizes the information provided by “Who Pays? A Distributional Analysis of the Tax Systems in All 50 States,” published by the Institute on Taxation and Economic Policy, or ITEP – a liberal think-tank based in Washington D.C. The study is available at http://www.itepnet.org/wp2009/il_whopays_factsheet.pdf.
ITEP uses a “family income” (FI) concept which is likely very similar to the “adjusted gross income” concept used on federal and state individual income tax forms. In order to derive FI, the average private sector wages and salaries ($49,390) were increased by 30 percent to approximate AGI (according to the Internal Revenue Service wages and salaries constitute about 70 percent of AGI). The resulting average FI was $64,208 per job in 2008.
The ITEP analysis shows that the effective tax rate for a taxpayer earning $64,208 in Illinois is 9.7 percent; split 5.1 percent for state taxes and 4.6 percent for local taxes. Since sales taxes are levied at the state and local levels, the sales tax burden in the ITEP analysis was split based on the share of each level as derived from Tax Foundation data. Overall, the average Illinois private sector job paid $3,298 in direct state taxes and $2,930 in direct local taxes (property taxes) in 2009.
Dividing the average state government compensation per job ($67,996) by $3,298 yields 21 average private sector jobs needed to sustain a single state government job in 2009. Dividing the average local government compensation per job ($58,346) by $2,930 yields 20 average private sector jobs needed to sustain a single local government job in 2009.
Note that this analysis is based on 2009 data and does not take into account the January 2011 increase in state taxes. In the short run, the tax increase will result in a drop in the number of private sector jobs it takes to fund one government job. In the long run, the tax increase will reduce private sector compensation and will result in an increase in the number of private sector jobs it takes to fund one government job.
The government employment and compensation data is from the U.S. Department of Commerce’s Bureau of Economic Analysis, or BEA. This data represents a year-long average of all employment on a full- and part-time basis.
The BEA does not conform to employment data published by Illinois state government for two major reasons:
- First, the state predominately uses Full-Time Equivalents (FTEs) for counting employment, i.e., two part-time employees are considered to be one FTE. As such, FTE counts are lower than employment counts.
- Second, the state does not include Higher Education employment.
However, BEA does not publish FTE data for the private or public sectors due to data limitations. As such, for comparability purposes, this study relies on the BEA data for the private and public sector comparisons.
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