State Fiscal Crisis

Illinois Ridiculed By Peers, Poked To See If Jobs Come Out


As Illinois tax rates shoot up, nearby states are fluffing their feathers in an attempt to catch the eye of businesses looking to leave the Land of Lincoln.

Hope this isn't too violent an image

Governor Pat Quinn (D) and the slim Democratic majority that passed the rate hike claim it was necessary to keep the state afloat: Considering Illinois' comptroller already spends much of his time apologizing to creditors for missing payments, it's more likely that businesses will start fleeing the flattened wreckage. Illinois now boasts the highest corporate income tax in the world when all charges are taken into account, and is heading into 2011 with a 40 percent budget shortfall. The tax hike drops the state 13 places in the Tax Foundation's State Business Climate rankings.

Reuters columnist James Pethokoukis finds the Illinois outlook stark compared to its most fiscally responsible neighbor:

Directly east of Illinois is the Hoosier State with a AAA credit rating. Indiana faces a 2011 shortfall of just 9 percent and expects to balance its budget even though the economic downturn has struck just as hard as in Illinois. Under Governor Mitch Daniels, a noted budget hawk who may run for the Republican 2012 presidential nomination, Indiana has continually pared back spending. It now has the fewest public employees per capita of any state. And it spends half as much per citizen as Illinois.

Other state governors took their shots at Illinois' duncery: Daniels compared the state to The Simpsons, saying "Oh you guys are nothing if not entertaining over there.…you know the dysfunctional family down the block?" Wisconsin Gov. Scott Walker (R) repeated his promise to lower his state's tax rates and hinted business should heed the old tourism bumper sticker motto: "Escape to Wisconsin." New Jersey's Chris Christie (R) was making plans for an Illinois salesmanship trip before the legislation was even signed. 

Other Midwestern state are moving towards better business environments as well. Michigan is proposing replacing its convoluted, break-filled business tax regime with a flat 6 percent corporate income tax. A Missouri group that passed a law last year requiring St. Louis and Kansas City to have regular votes on maintaining city earnings taxes is proposing eliminating the corporate income tax, and Iowa Gov. Terry Branstad (R) wants to slash his state's 12 percent corporate income tax in half.

More from Reason on state fiscal crises here.

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  1. Another socialist shit-hole going down the drain.

  2. The lemmings on the right must be from Illinois; they each get two votes!

    1. Not if they are still alive.

  3. Governor Pat Quinn (D) and the slim Democratic majority

    Wasn’t this a lame duck session, to boot?

    1. Yes. They also killed a cigarette tax of $1 and killed the possibility of a riverboat casino near Danville. Now Danville is a sordid little shithole filled with welfare babies and 15% unemployment. Many companies have closed or left and the town is a hollow shell of incompetence. So why not allow a guaranteed source of income and jobs in? It defies common sense but I’m not surprised one bit. The politics in this state are the worst.

      1. I’m not sure casinos really count as a guaranteed source of income anymore. When I was growing up in Rockford, the riverboat casinos in the Quad Cities were a big deal because you didn’t have to make a trip to Las Vegas or Atlantic City anymore.

        Now? You can’t throw a cow chip without hitting a casino in most populated parts of the country.

        1. A lot of the smaller ones are lame as hell, too. Vegas has done such a great job making gambling, and the trip itself, an experience as opposed to gambling for gambling’s sake, that there’s really no comparison. It’s like having to settle for flank steak after eating filet mignon. I always laugh when people ask me about visiting the casinos in Albuquerque–I tell them I could spend $100 a month going to the casinos here, or save that money and go to Vegas once a year.

      2. I agree that it was a stupid move, but the whole premise behind riverboat casinos is completely ass backward to begin with. It’s an idiotic solution to an even more idiotic law.

    2. Yes,
      The large Democratic majority voted it in during the last few hours of the lame duck session. The article would be more correct by referring to it as the large lame duck Democratic majority, which is now significantly smaller.

  4. yipee, my ex is a Chicago public school teacher which means she’s not leaving IL which means my kids aren’t leaving IL which means I’m not leaving IL and get stuck paying for her overpromised pension fund on top of everything else.

  5. The rest of my family has left. My wife and her family (and consequently me) won’t. I have night tremors…

  6. Maybe Illinois will collapse and become Somalia with corn. We all know how much libertarians love Somalia!

    1. Have you ever been to East St. Louis? (If you haven’t watch Escape from New York – it was filmed there). Somalia is perhaps a step up from there…

      1. Is that really true, filmed in East St. Louis ?

      2. Is that really true, filmed in East St. Louis ?

        1. According to Wikipedia, it is true.

  7. I have no idea why flyover country adopt policies that come from California. States like Illinois and Michigan is a significant reason why Californians do their best to make this cumdumpster of a state work. If God wanted flyover states to have high taxes, he would’ve given them an ocean.

    1. Great lakes. Like oceans without the salt.

  8. Let’s make it a crime for a business to leave the state.

    1. I hate Illinois Socialists.

  9. For a laugh:
    “Obama orders review of rules that hurt job growth”…..431S66.DTL
    Does anyone think he’d KNOW?

  10. Even if Democrats are worse than Republicans on state taxes and school choice, the parties are basically the same and libertarians should shun them both (#2 in a series.)

  11. Two words: “Laffer curve.”

    But, of course, retard pols cannot resist killing the goose-a-layin’.

    1. Do you remember the Laffer?

  12. I didn’t know the tax rate in IL was over 60%.

  13. Wait…

    Who is this Josh Brokaw guy?

    And did someone leave?

  14. The proposed constitutional amendment in Missouri would eliminate the personal income tax as well as the corporate one and replace them both with a higher sales tax.

    1. I like this idea. It puts more control of taxation into the hands of the people.
      If you want to pay less tax, buy less, go out of state, etc.

  15. Why Illinois’ CIT increase will raise prices, lower wages and force companies to relocate…

    There have been some articles and comments this week suggesting that Illinois will not lose employers because of the hike in their CIT from 4.8% to 7.0%. The math shows otherwise.

    Suppose I am a company located in Illinois with all of my manufacturing and employees located right next door to my major customer, Caterpillar. I have 20% pretax margins, pay my full 35% Federal and 4.8% State income tax which puts my after-tax margin at 12.0%. Because Illinois raised the State tax rate to 7.0%, I will need to raise my prices by 3.8% to earn the same after tax profits. If Caterpillar rejects my 3.8% price increase, then I must cut wages and other expenses to maintain my same profits. Either way, there will be wage pressure on my employees and price pressure on my customers.

    And since companies with no facilities in Illinois must also pay taxes on the profits that they derive from sales inside of Illinois’ borders, they must also raise their prices to all Illinois customers. Suppose my company is based in Texas where there is no State Corporate Income Tax and I sell to Caterpillar plants in Illinois and Texas. To generate the same level of profits on each sale, I must charge the Illinois customer 12.0% higher prices than my Texas customer. Said another way, Texas customers get to buy my products at a 10.8% discount to Illinois customers.

    This helps to explain why Caterpillar recently put a new operation in Texas and not Illinois. Expect the decisions to not put new operations in Illinois and to move them from Illinois to accelerate. I wonder how long it will be before one of the major trading floors moves from downtown Chicago?

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