Well before COVID-19 paralyzed the U.S. economy, Illinois was already broke, suffering from underfunded pension plans and skyrocketing debt. While providing some direct aid to states, the Coronavirus Aid, Relief & Economic Security Act is going to cause state income tax revenue to decline even further. Illinois is unwittingly about to allow as much as $1 billion to flow from state coffers to high-income taxpayers.
The CARES Act is a federal bill, but it will affect the tax revenues of states like Illinois, whose tax codes automatically reflect changes to the federal Internal Revenue Code in their own tax code. The CARES Act allows pass-through business entities—such as partnerships and S corporations—to use tax losses from 2018, 2019 and 2020 to wipe away 100 percent of all business and non-business income for those years. Unlike corporations that are taxed at the business level, pass-through entities are taxed by way of profits earned by the company's owners; profits are passed through the business and onto the business owners who file individual tax returns.
Read more at Crain's Chicago Business