Illinois Ranks 38th in State Tax Competitiveness Index

Illinois climbed one spot to 38th out of 50 states in the Tax Foundation's annual ranking of how states structure their tax systems.

Updated on Nov. 13, 2026 in Taxes

Illinois Ranks 38th in State Tax Competitiveness Index

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The Tax Foundation ranked Illinois 38th out of 50 states in its State Tax Competitiveness Index, up one spot from 39th last year. The index evaluates how states structure their tax systems across several components.

Why it matters

Illinois descended or held steady in each index year since 2020 before this year's modest improvement, which affects how the state compares with its neighbors for businesses and taxpayers in Illinois. Its estate or inheritance tax weighed on its property tax component, showing how individual tax choices shape the overall ranking.

The Tax Foundation's index ranks Illinois 11th on individual income tax, where it levies a flat 4.95% rate, but places it in the bottom ten for corporate, sales, property and unemployment insurance taxes. The source does not explain the weighting of each component.

The players

Tax Foundation

The Tax Foundation is a nonpartisan tax policy research organization in Washington, D.C., known for its annual State Tax Competitiveness Index.

The details

The index ranks states by component, including individual income tax, corporate taxes, sales taxes, property taxes and unemployment insurance taxes. Illinois's estate or inheritance tax hurt its showing in the property tax component, while neighboring Missouri ranks 9th, Indiana 14th, Iowa 18th, Wisconsin 20th and Kentucky 26th.

2020: Illinois began descending or holding steady in the index rankings.
Prior year: Illinois ranked 39th in the State Tax Competitiveness Index.
November 13, 2026: The index ranking placing Illinois at 38th was published.

Market Dynamics

Illinois's one-spot gain in the Tax Foundation's State Tax Competitiveness Index follows a run of years since 2020 in which the state slipped or held steady, placing it among the states whose tax structures lag the leaders on the index. Wyoming holds first place while New York ranks last at 50th.

Illinois's flat 4.95% individual income tax rate and its estate or inheritance tax are the features most directly affecting residents' tax bills and estate planning. Residents comparing their state with neighbors can see that Missouri, Indiana and Iowa rank higher on the index.

The takeaway

Illinois's modest climb suggests its tax structure is stabilizing after years of slipping, but its estate tax and property tax components still weigh on its position. Residents and businesses weighing a move can compare Illinois's flat income tax rate against neighboring states on the index.