When lame duck lawmakers helped squeak through a whopping 67 percent Illinois income tax hike in 2011, critics warned that the only winners would be moving companies.|
Editorial pages including this one also cautioned against believing the promise that part of the increase would be allowed to expire. Lawmakers couldn't resist such cash in 1989 when they made a far smaller increase permanent. Why would they do so now with billions of dollars at stake?
We were hardly prescient on either score. Within hours of the tax hike vote, neighboring Gov. Scott Walker was urging Illinois business to "Escape to Wisconsin." Other states followed suit and the numbers show many accepted their offers.
Meanwhile some lawmakers immediately began to set the stage for what now appears to be an all-but certain extension of the portion of the tax hike set to sunset in January. The inevitability of the campaign led by Gov. Pat Quinn, House Speaker Michael Madigan and Senate President John Cullerton -- the trio of Democrats who run things in Springfield -- doesn't lessen our disappointment.
Nor does it ease our frustration over yet another broken promise from a state that has tinkered around the edges of reform rather than tackle the serious structural problems that plague it. It would be easy to blame it all on a nagging recession and a crippling public pension problem, if it weren't for the leadership demonstrated in such states as Wisconsin, Indiana, Ohio, Michigan and Iowa.
But Illinois public officials are slow learners, even when they have so many excellent examples to guide them. On April 15, the Wall Street Journal published "What's the matter with Illinois?" a comparison of government economic policies and their results in Illinois and the four other Great Lake States that was eye-opening, even for those who have witnessed Illinois' economic meltdown firsthand.
The WSJ's numbers tell the story:
Illinois' 8.7 percent jobless rate is the nation's second highest and it has fallen by just 0.7 percentage points since January 2011, when legislators hiked the personal income tax from 3 percent to 5 percent and the corporate rate from 7.3 percent to 9.5 percent -- fourth highest in the nation and highest in the Great Lakes, according to the Journal.
That jobless rate decline is minuscule compared to Michigan's drop from 11 percent to 7.7 percent, Ohio's decline from 9.1 percent to 6.5 percent, Indiana's fall from 9 percent to 6.1 percent and Wisconsin's 7.7 percent to 6.1 percent drop. What do those states have in common? None of them raised taxes -- Ohio, even cut them. Only Illinois grabbed more. (Also worth noting, WSJ reminds us, Michigan and Indiana passed right-to-work laws and Wisconsin revamped collective bargaining with employee unions.)
Illinois also has the slowest personal income growth in the Great Lakes and a third of that came from money from the feds for entitlement programs which mostly serve those with low or no income. The analysis also said 31,000 Illinoisans left the state's labor force in 2013. That included the loss of 9,000 manufacturing jobs, while Michigan gained 17,000 and Indiana and Ohio each attracted 12,000 of those new well-paying manufacturing positions.
The WSJ piece didn't detail similar Iowa figures, but Quad-Citians can attest to the exodus of companies fleeing to that state's better tax climate. Also added to the high-tax mix here are Illinois sales tax rates, which are 14 percent to 33 percent higher than other Great Lake States, plus the second-highest property taxes in the entire nation.
And yet the march toward making permanent the latest Illinois tax grab continues in Springfield. The Illinois Policy Institute's Scott Reeder reported last week that a top Speaker Madigan deputy expects a vote this spring. State Rep. Frank Mautino, D-Spring Valley, also said it could be coupled with elimination of tax exemptions -- probably those pesky loopholes politicians who don't want to make spending cuts always promote. Rep. Mautino said that legislative money-crunchers are looking at "redoing the whole tax code." That should have everyone quaking, despite promises that majority Democrats will talk with the business community; history doesn't offer much reason to expect they will actually listen.
Added to this toxic tax mix is the speaker's suggestion that Illinois put a surcharge on millionaires. It's been said that Madigan' Millionaire Tax is going nowhere, but as most Illinoisans know by now, in Springfield nothing is ever dead.
Though big and costly incentive packages have become a way of life in Illinois, they have little impact on the vast majority of the job creators. Most businesses don't expect big government handouts. What they crave are fair tax policies and regulations that are predictable and reliable.
Until Illinois leaders create a government that delivers on both, there literally will be billions of reasons the Prairie State continues to be the region's odd man out and the taxpayers who remain will pay the price.
Rock island, IL Details
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