Illinois state lawmakers are considering a statewide payroll tax that would raise business costs, reduce wages and kill jobs. Workers are already taxed on their income, meaning this would tax their wages twice.

Illinois employees and business could soon find themselves paying yet another state income tax.

Senate Bill 2413 , filed by state Sen. Ram Villivalam, D-Chicago, would create a statewide payroll tax to be paid by both employees and businesses. The legislation would levy an additional 1.12% tax on eligible wages on top of the 4.95% state income tax already paid by Illinoisans. It would take effect Jan. 1, 2027.

But the language of the bill allows for the tax rate to climb even higher.

Revenues from the tax would go to fund a new family and medical leave program that mandates employees be eligible for up to 18 weeks of paid family and medical leave per year. It offers an additional nine weeks of paid leave for pregnancy-related issues.

The first 40% of the tax – or 0.45% of eligible wages – would be paid by employees who would have their tax liabilities withheld from their paychecks. The remaining 60% – or 0.67% of eligible wages – would be paid by businesses, creating a mandatory business expense that scales with the number of employees and the wages a business pays their workers.

Adding employees, paying them more leads to higher taxes. See the problem for Illinois jobs?

Payroll taxes have been shown to reduce overall employment and wages . Reductions in hiring lead to under-the-table employment , push some workers out of the labor force entirely and encourage businesses to send jobs offshore or automate them.

There’s also a chance this tax is illegal . The Illinois Constitution mandates a single tax on income. Corporations and businesses already face a flat income tax. Adding a payroll tax based on wages may be interpreted as a form of “double taxation” that is not permitted in Illinois.

Regardless of the legality, Illinois lawmakers should reject this push for even higher taxes on Illinois’ families. When asked, a new poll from the Illinois Policy Institute found 54% of Illinois voters said high taxes was the No. 1 issue facing the state, with the economy ranking second.

This confirms sentiments voters expressed at the polls in 2020 when they soundly rejected calls for increasing the state income tax. Illinois already has an extremely hostile tax environment for residents and businesses, who suffer the second-highest property and gas taxes in the nation, the third-highest corporate income tax and seventh-highest sales taxes.

Altogether, Illinois has the highest state and local tax burden in the nation for the average household. A payroll tax would make the situation worse.

Lawmakers have extended the third reading deadline for SB 2413 until May 23, marking the second time the deadline for the bill has been extended and showing politicians are seriously considering this new tax. This is particularly relevant as the state will aim to pass a new budget by May 31 and was facing a $3 billion deficit prior to conveniently-timed increases in projected revenues.

Lawmakers should reject this push for higher taxes and instead focus on reining in state spending, which has grown nearly $17 billion during the past seven years. Fortunately for Illinoisans, there is an alternative to Gov. J.B. Pritzker’s budget approach. The Illinois Policy Institute has proposed an alternative budget plan that would bring long-term financial stability to the state and foster an environment in which families and businesses can thrive.