Tax Day: Here’s how your $4K in state income taxes is spent

Just over 5% of the average state income tax return supports economic development and public safety, while almost 28% goes to government worker pensions and benefits. Here’s a breakdown of how Illinois will spend your state income taxes.

With the highest combined state and local tax burden in the nation, Illinoisans are right to ask: What are we paying for?

The average Illinois personal income tax return was about $4,030 for fiscal year 2024. About half of that is split between public education and state worker pensions and other employee and operating costs.

The state taxes income at a flat rate of 4.95%. The number of returns has held roughly steady at 6.2 million, but the total tax collections have jumped from $17.3 billion in 2017 to $25.6 billion in 2024. Collections this year are projected to hit $27.75 billion and then $28.73 billion in 2026.

The amount per return has grown by $1,589 from 2017 to 2024.

Individual income taxes are just part of the load placed on Illinois families. When you consider Illinois’ combined state and local sales, excise, income and property taxes, the average household this year will pay $13,099, costing more than 16.5% of a family’s income.

The state distributes income tax dollars through the general funds budget to support everything from pensions to prisons to public health. How this money is allocated reveals the state’s financial priorities and whether taxpayers are getting value in return.

Here’s a breakdown of how Springfield spends Illinoisans’ income tax dollars:

• $1,115: More than one-quarter of the average income taxes paid per return supports state employee pensions, at $752, and other government services, at $363. Government services includes state worker health care benefits and the costs to operate much of the executive, legislative and judicial branches of state government. These costs in the general funds budget are rising fast – up 7.3% since last year, outpacing inflation and gross domestic product growth.

• $1,003: About one-quarter covers expenses for public K-12 schools and universities. Education was the largest line item in the state budget in 2025, up approximately 4.7% from the prior year.

• $855: Illinois allots one-fifth of the average return for human services expenditures. This includes spending on behavioral health, early childhood services, and family and community services. Human services spending has increased nearly 8.1% during the past year.

• $665: Another large portion of Illinois income taxes, about 16.5% of each return, helps fund health care coverage for Medicaid recipients and other state health programs. This includes an estimated $210 million for weight-loss drugs for government workers.

• $187: Far less – only 4.7% – goes to public safety. But public safety is largely funded by other state funds. Spending covers agencies such as the Illinois State Police and the Department of Corrections.

• $28: Even though Illinois struggles with one of the nation’s highest unemployment rates and sluggish economic growth, less than 1% of the average income taxes paid per return supports economic development expenses in the general funds budget. As with public safety, economic development is covered primarily by other state funding.

Why it matters?

Taxpayers are paying nearly $1,600 more than they were just seven years ago and getting fewer of the services they expect or that improve the quality of life in Illinois. Still, the Illinois budget expands.

Gov. J.B. Pritzker propped up state spending with a mixture of temporary COVID-era federal aid, windfall revenues and a slew of new taxes since 2019. He’s bumped up the state budget by $16.7 billion since he took office. State budgets were $39 billion before Pritzker and his latest ask is to spend $55.2 billion in fiscal year 2026, starting July 1.

With the temporary pandemic revenue running dry and the latest projections showing a $1.2 billion shortfall in what Pritzker wants to spend during 2026, Illinois taxpayers are at risk of future hikes – the  state’s favored get-out-of-budget-crisis-quick approach.

Instead of searching for new ways to tax overburdened residents, Illinois should focus on aligning spending with what taxpayers can afford by tying it to the state’s economic growth. Fiscal stability depends on responsible spending, not higher taxes, to deliver better value for residents’ hard-earned dollars.