Illinois’ Ship of Fools

By Michael Kleen

July 18, 2011
Disclosure

Over the past decade, Illinois legislators have borrowed and spent our state into the ground, and now they seem determined to tax it into the ground as well. This is no harmless “politics as usual” – their budgetary machinations have very real consequences. Looming fiscal crisis, coupled with an inability to find solutions other than raiding pension funds or raising taxes, is contributing to an overall decline in our quality of life, not to mention crippling the job prospects of the average Illinoisan. Like a ship of fools, our public officials are ignorant of their course and blind to the injury they cause.

While Governor Quinn and the Illinois Legislature wrangle over how to fix their mess, they are facing an exodus of their tax base. Companies and individuals are fleeing to greener pastures, contributing to an overall decline in the state’s political clout. Thanks to slow growth rates compared to states like Texas, Florida, Georgia, and Arizona, Illinois lost a Congressional seat in 2000 and another in 2010. What do Texas, Florida, Georgia, and Arizona have in common? Besides a warmer climate, all have low tax rates. Florida and Texas have no state income tax at all.

Since the Illinois Legislature passed a dramatic personal and corporate income tax increase (not to mention a new Internet sales tax) earlier this year, companies such as Sears, Jimmy John’s, and Caterpillar have all publically threatened to leave Illinois. According to Jim Dugan, Caterpillar’s chief spokesman, the Illinois tax increase will cost the company’s 23,000 employees in the state about $40 million this year. Like many individual taxpayers who have gravitated toward states in the South, Caterpillar recently announced plans to build manufacturing plants in Texas and North Carolina rather than Illinois. Recently, another company, Special Metals Corporation, announced it would be moving its operation to Indiana in the fall. Of that move, Indiana Governor Mitch Daniels remarked, “Special Metals is joining a growing list of companies that are leaving Illinois for the Hoosier State.”

Governor Quinn’s tax increase raised the state’s personal income tax rate from 3 percent to 5 percent, which means that if your gross income was $50,000 a year, your state income taxes will rise from $1,500 to $2,500 a year. The corporate tax rate rose from 4.8 percent to 7 percent. Rather than generating significant additional revenue, these taxes will cause revenue to stagnate by driving individuals and businesses from the state. If the Sears Corporation decides to move its headquarters from Hoffman Estates to North Carolina, for example, annual tax revenues to the state of Illinois will decline by $130.7 million.

In 1983, Jimmy John Liautaud opened his first sandwich shop in Charleston, Illinois with a $25,000 loan from his father. Since then, his restaurant chain has grown to over 1,000 stores across the country. With its company headquarters currently located in Champaign, Illinois, Jimmy John’s is one of the great entrepreneurial success stories of the past decade, yet even Jimmy John himself is fed up with the tax policies of Illinois. “All they do is stick it to us,” he recently told the Champaign News-Gazette. He has applied for residency in Florida and is considering moving his company headquarters to a different state. Currently, Jimmy John’s trainees traveling to Champaign account for around 350 motel stays a week. Thanks to Governor Quinn’s tax hike, now they might be taking their travel dollars elsewhere.

The solution to Illinois’ current predicament is, of course, to keep government spending at a minimum and to pursue policies that will expand our tax base rather than shrink it. Marco Rubio, the US Senator for Florida, put it best when he said, “We don’t need new taxes. We need new tax payers, people that are gainfully employed, making money and paying into the tax system.” Are the policies being pursued by Governor Quinn creating new jobs or driving jobs out of the state? The answer is clear. Senator Rubio explains, “I have never met a job creator who told me that they were waiting for the next tax increase before they started growing their business. I’ve never met a single job creator who’s ever said to me I can’t wait until government raises taxes again so I can go out and create a job.”

With an unemployment rate hovering around 9 percent, can Illinois afford to put the squeeze on industry and other sources of employment to pay for our government’s irresponsible spending habits? Illinois needs a lean, responsible government that will attract businesses and allow its people the freedom to pursue entrepreneurial ventures, create jobs, and take their goods and services to the marketplace. We can no longer afford to abide this ship of fools.