Wisconsin

Illinois' Fiscal Problems Won't Stay in Illinois

Wisconsin's budget takes a $51 million hit as The Land of Lincoln tries to extract more revenue from its residents, including those who work or live elsewhere.

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Joe Sohm Visions of America/Newscom

A few weeks back, Chicago Tribune columnist John Kass offered a modest proposal for how to tackle Illinois' persistent (and worsening) budgetary problems.

"Let's finally admit that after decade upon decade of taxing and spending and borrowing, Illinois has finally run out of other people's money," Kass wrote. His tongue-in-cheek solution: "The best thing to do is to break Illinois into pieces right now. Just wipe us off the map. Cut us out of America's heartland and let neighboring states carve us up and take the best chunks for themselves."

In Kass' plan (which included an updated map of the Midwest, sans Illinois), the state would be consumed by it's neighbors, with parts of Illinois subsumed by Indiana, Kentucky, Missouri, Iowa, and Wisconsin.

Those states have done a better job of managing their budgets and creating economic environments favorable to job creation, Kass reasoned, so maybe they can fix what's wrong with Illinois. At the very least, dissolving the state would be better for most Illinoisans than the alternative: higher taxes to pay off decades of piled up debt—including $251 billion in unfunded pension debt—along with worsening credit ratings, more never-ending budget fights, and cuts to government services.

I don't know if Kass is right about the merits of breaking up Illinois, but he's certainly right that the state's fiscal problems can no longer be contained within its borders.

Wisconsin's Legislative Fiscal Bureau (the state's equivalent of the Congressional Budget Office) estimates that tax increases approved by the Illinois legislature as part of that state's new budget will reduce Wisconsin's revenue by an estimated $51 million next year.

That's because of a longstanding tax agreement with Illinois allowing people who work in one state but reside in the other to pay taxes only in the state where they live. Because more Wisconsinites work in Illinois than vice versa, Wisconsin makes a payment to Illinois every year to offset the difference. That payment is going to grow much larger in the wake of a 32 percent income tax increase, part of an Illinois budget signed last week after a two-year impasse by Gov. Bruce Rauner.

The Fiscal Bureau notes things would be worse without the tax agreement. Without it, Wisconsinites working across the border would have to pay taxes to Illinois directly.

Wisconsin, however, could still come out ahead. A 32 percent income tax increase is sure to drive more residents out of Illinois. The Land of Lincoln lost more than 37,000 residents in 2016, the third consecutive year that Illinois lost more people than any other state.

And that was before a massive tax hike.

No wonder Gov. Scott Walker is rolling out the red carpet for the exiles.

"With the concerns they're seeing in Illinois right now, that makes Wisconsin—whether it's Kenosha, Racine, Milwaukee, Walworth, Rock County—all those areas will benefit from that," Walker told a local TV station during a parade on the Fourth of July.

The breaking-up of Illinois won't happen geographically, as Kass sarcastically suggested. But it will happen. With the fiscal problems in Illinois spilling over to its neighbors, expect ever more people escaping from America's most mismanaged state.

Correction: This story has been updated to correct the Wisconsin Legislative Fiscal Bureau's estimate.

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  1. In PA we have a spending plan signed into law with no revenue bill that will raise the additional revenue that the spending plan needs to be balanced.

    So state lawmakers threw up their hands and went home.

    1. one of IL’s last legislative sessions was only 11 minutes, just enough time to rename a highway after obama, they didn’t even pretend


  2. A few weeks back, Chicago Tribune columnist John Kass offered a modest proposal for how to tackle Illinois’ persistent (and worsening) budgetary problems.

    Eat children? I mean…Illinois is crap but it isn’t Ireland, people.

    1. Good God NO. Eat the old folks who are a money sink, not the children who will soon be taxpayers.

      1. I guess you must be young

        1. For all you other kiddies out there who didn’t get the reference, https://en.wikipedia.org/wiki/A_Modest_Proposal

  3. I have a co-worker who’s a native of Chicago who just came back from there. He said that a normal, run-of-the-mill middle class homeowner was paying something like $10 grand in property taxes. I nearly fell out of my chair. I don’t know if this is true, but it’s no wonder people are fleeing over the border to Indiana– which, according to him, people are doing in droves.

    1. Oh, and according to him this wasn’t an in-Chicago house, but a house in the outer counties.

      1. I have folks in Wheaton, which is a middle upper middle town who own a 60 yr old house that is nice, but nothing elaborate. He is a retired teacher and she never worked and raised 4 kids to put it in context. They are paying $16K a year in property tax which is far more than they ever paid in payments when they were paying. My house is about the same thing and I pay about $2.8K. Illinois taxes are stupid high.

    2. I mean…maybe…but without knowing the value of the property in particular that doesn’t really mean shit. I know plenty of people here in Texas that pay that or more in property taxes.

      1. But Texas has no income tax, and that is for a house in the top quartile.

        1. But at least in Illinois you don’t have to live around Bubba. Or Billy Bob. Or Billy Ray.

          1. Worse, we have Mike Madigan and Rahm Emanuel. It’s a state run by thieves and whores. (Apologies to whores, who at least provide an honest service on a voluntary basis rather than at gunpoint).

      2. Again, he was saying a standard middle class, nothing-special home as he described it. In an Illinois county, I’m going to assume that means a house of less than $200k.

        But since you asked, I did some googling:

        Before the welcoming committee even arrived at their front door, the Schurtz family’s first property-tax bill arrived in the mail. “We laughed,” Michelle said. “That’s all we could do.”

        The Schurtzes paid their first full year of property taxes in 2015. The bill totaled $11,000.

        When it comes to property taxes, sticker shock is typical in Illinois. From small-business owners in Chicago to suburban dwellers in middle-of-the-pack school districts, long-time Illinoisans are often bewildered as to why they pay the second-highest property taxes in the nation, at an average of more than 2 percent of a home’s value.

        1. I’m going to assume that means a house of less than $200k.

          Unless you’re in a ghetto, a typical middle class house in the Chicago area is $300K minimum.

          1. Median home prices in the Chicago area, depending on county range from 200 to just below 300

          2. Oh, and according to him this wasn’t an in-Chicago house, but a house in the outer counties.

            Even I have to realize that everywhere ain’t like the West Coast. The midwest is full of full-sized, middle-class homes that you can snatch up for $140,000.

        2. Fair enough, that puts it in context.

      3. Texas doesn’t have a state income tax though.

        I’ll give you a couple examples from people I know.

        My coworker lives in a 2400 sq foot house on a small lot in McHenry county (far northwest suburbs)
        Value of the home and land is around 270,000. The 2013 tax bill was just over $8000.

        Wife’s aunt in Aurora. $450,000 home (the value has been volatile) and a 13,000 tax bill. Think they are in Kane county (far west suburbs)

        I used to pay about 3600 a year on a house that when I sold it was 150,000. The house was in an unincorporated area of Kane county. Moving the same house into town would have meant a 50%+ increase in the tax bill.

        1. By comparison

          I now live in a small town in Iowa (I got to keep my Illinois job so no more paying Illinois income tax…though Illinois still owes me money as my employer screwed up and withheld Illinois tax last year…15 weeks and Illinois still has not processed my refund)

          $170,000 home within town limits. 3300 tax bill

        2. I live in Galveston County Tx, my house is around 2100 sq ft. They just apprised it at 187K. I pay around 5500 in taxes (mostly school)

        3. I was paying $1200 prop. tax per year for a dumpy house in Covington, LA that I paid 45k for and fixed up.
          Then I moved to Mexico, where I live in a mansion with 2 guest cabins in a small city with perfect climate. Property tax is $80 per year. Come on down!

          1. Gonna go up. You gotta pay for the wall.

        4. I live in Winnebago county which I believe is still the highest tax area as a percentage of value. Taxes on my house assessed at 160k are just north of 5200.00.

        5. I live in Winnebago county which I believe is still the highest tax area as a percentage of value. Taxes on my house assessed at 160k are just north of 5200.00.

          1. Virginia here in a suburb of Richmond and my house is assessed at 160 or so and my tax is 1500 a year.

      4. Texas property taxes mostly run about 2.4% of market value with a 10% cap on annual tax increases. Some areas around Houston have “mud districts” where the property taxes are higher, about 3% I think. Investment property and 2nd homes don’t get a Homestead Exemption and pay about 25% more. Senior citizens get a huge discount since they’ve been milked so long. The property taxes fund city, county, schools, and hospital. I think the state is funded by the 6-8.25% sales tax depending on locale, part of which they share with local govt.

        1. Rural property taxes with an agriculture exemption are very low.

          1. Right, I just meant that the sum of how much they were paying in taxes on property as a dollar amount without knowing the value of the property itself was a meaningless figure. It’s been clarified though.

    3. A former co-worker who had worked as a nanny for a wealthy family in Chicago said that family’s property taxes were around $70,000/year. I’m sure it was a million dollar home, but still. Meanwhile, here in middle-of-nowhere rural NC I bought a 2-bedroom house for $68,900.

  4. The fundamental problem is corruption. Splitting the state won’t change that.

    1. No, the fundamental problem is Democrats.

      1. Repetition is a great way to help folks remember things.

  5. This article is poorly written. It practically says Rauner signed the budget bill when in fact he vetoed it but it was overridden by supermajority.

  6. RE: Illinois’ Fiscal Problems Won’t Stay in Illinois
    Wisconsin’s budget takes a $5 million hit as The Land of Lincoln tries to extract more revenue from its residents, including those who work or live elsewhere.

    I was one of the fortunate few who escaped the Land of Lenin decades ago. One could see the corruption in such progressive utopian enclaves as East St. Louis, Alton, and Chicago to see what the future for the state would be. According to Bloomberg, Illinois now enjoys junk bond status. Congrats to all the (crooked) politicians that made Illinois the state that it is today. More people are leaving that state every day due to crime, high taxes and a major league kleptocracy that would make the UN envious. More good news for Illinois and its denizens. A state cannot file bankruptcy.
    Yeah, the future of Illinois sure looks bright.

  7. No need to break up the state. Just outlaw the democratic party for twenty years, and don’t let democrats re-register in any other party.
    And re-invoke the federal constitution.

  8. Part of the property tax problem for Illinois is the exceptional number of taxing jurisdictions.

    In most parts of the country for example, the library would be a city or county thing. In much of Illinois, its a taxing body in its own right. You only get one bill from county treasurer’s office of course, but each of those special taxing jurisdictions have their own officers, etc.

    Taxing body overload

  9. As an Iowan, we want no part of consuming Illinois.

  10. $251 billion in unfunded pension debt

    worth more dead than alive. free cigs and heroin and motorcycles and skydiving.

    1. How the hell do you ever right a ship that is underwater by 251 BILLION??????

  11. I was about to say, will the last person to leave Illinois please turn out the lights, but that won’t be necessary–the power will have long since been turned off due to non-payment of the electric bill.

  12. This is the impetus to the sequel of the California migration. Idiots who voted for big government spending are finally paying the piper, don’t like it and move somewhere else to do the same damn thing all over again. Colorado and Nevada were pretty fiscally conservative until the leftists had enough of California and moved there, tipping the cart in the legislatures and voila! Now Nevada and Colorado are busy confiscating other people’s money and terminating liberties.

    There are several borderline midwest states that could suffer the same fate should Illinois have a mass exodus of people running from their own creation. In many respects, it’s the field of locust who no longer wish to stay where they are because they’ve destroyed the field in which they were hatched.

    1. More piper paying coming in many places since the public union states also have huge deficits in their pension plans too.

    2. Just what liberties are being terminated in Nevada? I lived there for almost 20 years and would love to have you enlighten me.

  13. A couple decades ago, the governors of Wisconsin and Illinois were Tommy and Jim Thompson. Wisconsin put up signs on the border which read: “Governor Thompson wants you to move your business to Wisconsin!”

  14. We plan on moving as soon as possible, I hope within the next couple of years, my son and his wife plan on moving as well. Those of you who remain: good luck, I certainly won’t miss paying for your politician’s insane spending. But, hey, keep sending them back to Springfield. After all, they do promise you bread and circuses.

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