State Fiscal Crisis

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

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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.