Analyst: Illinois must create less-hostile tax climate to retain residents, businesses

Lake County Gazette | Nov 16, 2016

Illinois needs to diversify its tax base and make changes to become more competitive if it wants to stem the tide of people leaving the state, an analyst for an independent policy organization said during a recent radio show interview.

“There are opportunities to be competitive,” Jared Walczak, a policy analyst for the Tax Foundation, said during a recent edition of Illinois Rising. “And you don’t need to be the lowest. There are lots of good reasons to live in Chicago and I imagine that people are willing to pay more to live in Chicago than they might be to live in some other area in the region. But you have to be competitive and, right now, you do have some of the highest levies in the country.”

Walczak ticked off a number of Illinois taxes that are contributing to the state’s decline.

“While certainly there are some other states that have relatively poorly structured tax systems, yet states like Indiana, Michigan and Missouri nearby that are doing very well,” he said. “Indiana in particular is a state that has really done a good time in recent years in finding ways to compete, to not only lower taxes but to make their tax system more neutral, more pro-growth, to find opportunities to make that a really attractive state to live and to work.”

The Tax Foundation’s State Business Tax Climate Index for 2017, released this fall, bears that out. Illinois, according to the index, ranks 23rd among U.S. states for state business tax climate, 26th for corporate tax, 10th in individual income tax, 35th in sales tax, 38th for unemployment insurance and 46th for property tax.

By comparison, Indiana, where many leaving Illinois are going, ranks on the index 8th best overall among U.S. states for state business tax climate, 23rd for corporate tax, 11th in individual income tax, 10th in sales tax, 10th for unemployment insurance and 4th for property tax.

A recent Paul Simon Institute poll found that 47 percent of Illinoisans participating in that poll would like to leave the state.

“There is a heavy emphasis on real property taxes in this state, particularly in Cook County but also in some of the bedroom communities,” Walczak said. “And you do see it elsewhere in the state at well. There isn’t an easy solution to this, I don’t think it necessarily even starts there. This is just sort of the tax that everyone sees. You get that property tax bill, that is enormous. It’s not even, perhaps, the most damaging tax the state has. This goes to spending priorities in the state, it goes to a lot of issues beyond just taxation. There does need to be an effort to diversify the tax base to not put a burden as strongly on real property because people are getting hit pretty hard.”

Population in the majority of Illinois’ large cities, including Chicago, is on the decline, according to data released this year by the U.S. Census Bureau. Indiana officials are trying to take advantage of that outflow of Chicago area residents, beckoning to would-be emigrants with the promise of lower home values and a slower pace of life, in addition to a fiscally sound state budget.