Temporary Taxes: How Often Does the Sun Actually Set?

In January 2011, Illinois enacted legislation that made changes to the personal and corporate income tax rates. These tax increases are scheduled to begin their phase-out in the near future. However, as Illinois continues to face budget pressures, some lawmakers have questioned whether Illinois’ temporary tax increases should be made permanent, and others have noted that the future of the tax should be discussed. Indeed, not all states that have enacted temporary tax increases have let rates drop on their “sunset” dates. Between December 2007 and January 2013, 13 states (including Illinois) enacted tax increases scheduled to be phased out at some later date, for a total of 14 temporary tax increase packages. (One state – California – enacted two different sets of temporary tax increases during this period.) Some of these tax increases were legislative, and others were brought directly to voters (for example, California in 2012).2 Eleven of these 14 tax packages have reached the sunset date of their temporary increases as of this writing or were extended prior to their expiration date. Three sunset dates are still in the future and have not yet been acted upon (including Illinois). The authors find that most of the states that passed temporary tax increases since December 2007 have allowed the taxes to expire. Seven of the 11 scheduled tax sunsets were phased out as scheduled.