Throughout Illinois, Taxing and Spending Only Brings on More Economic Woes

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Quickly now…what is the capital of Illinois?  Many an eighth grader, robotically reciting state capitals like a word-association game, would certainly know the correct answer. If your first impulse was to raise your hand and yell out, “Chicago,” there would certainly be a tall stool and dunce cap waiting for you in the corner. However, there are definitely plenty of reasons why you and many others would have that response; after all, it seems that the epicenter of Illinois politics (and, often, notoriety) is Chicago. Local legend even has it that the city was not dubbed the “Windy City” because of the strong prevailing winds sailing across Lake Michigan, but because of the overabundance of hot-air-bellowing politicians!


From a statewide tax burden analysis, Chicago is just the icing on the cake, adding its own bullish layer of city and local taxes over and above those emanating from the legislative chambers in Illinois’ actual capital city, Springfield. Chicago’s taxes alone ranks it among the top five highest city taxes in America. But unfortunately the truth is, no matter where you live in the state of Illinois, your tax burden only varies in degrees of ugliness.


Illinois is in the worst financial shape of any state in the country. It has among the highest gasoline taxes and utility costs, as well as the country’s worst bond rating. Decades of amassing huge entitlement obligations, widespread corruption, and wasteful spending have run up an enormous bill, and though politicians try, no amount of increased taxation is sufficient to start paying down the tab. Data shows that this trend only continues. By the end of this current year, Illinois will also face $1.9 billion in unpaid Medicare costs alone.  The state’s cumulative deficit for “government activities,”—namely, state financial obligations verses incoming revenues — rose an additional $1.2 billion in the fiscal year ending June 30 to $47 billion, nearly tripling the amount in only seven years.


Let’s face it: There is only so much a business and a taxpayer can take. Watching their paychecks and profit margins erode ever further, those who can afford to, take what they own and leave! Between 1992 and2010, the state of Illinois lost $29.27 billion in annual adjusted gross income from people and companies who did exactly that. Circling back to Chicago and Cook County for a moment: They lost over $16 billion just to other areas within the state, a testimony to the flight of wealth from this pinnacle of abusive taxation.


While this same data shows that the majority of wealth moved to low-tax states like Florida, Texas, and Arizona, Illinois ex-pats needn’t go that far. Neighboring Republican governors like Scott Walker of Wisconsin and Mike Pence (and Mitch Daniels before him) in Indiana have taken ahold of statewide expenditures and entitlements and successfully turned deficits into surpluses, all while lowering taxes. As you might expect, the increasingly favorable tax environment that they foster is becoming a magnet for the weary taxpayers of Illinois.


Documented evidence shows that low taxes draw in outside wealth. As a result, the tax base increases and revenues rise. Even New York, which currently occupies the 49th position on Chief Executive’s annual listing of the Best and Worst States for Business, is testing the waters of tax reduction initiatives with its new “Start-Up NY” program. With a ranking of 48th, it is time for Illinois to come up with some creative ideas of its own to stop the bleeding of outward migration, bring new businesses and taxpayers in, and lure expats back home. Serious tax reforms must lead the way in that effort.