Illinois Legislature Keeps All Options on the Table

Thursday, January 13, 2011 at 7:42 PM by

The Illinois Legislature, facing a budget deficit of up to $15 billion, has approved a significant increase in individual income and corporate tax rates, according to news reports. The tax increases would expire after four years, and are accompanied by state spending limits. If the state breaches the limits, the tax rates revert to current levels, unless the governor declares a fiscal emergency. This Reuters article has more. Clay Barbour reports in The Capital Times that Governor Walker is planning what the article calls an “all-out marketing campaign on the Wisconsin-Illinois border.”

Wisconsin Governor Scott Walker issued a statement in response to the Illinois tax increase, declaring Wisconsin “open for business” and inviting Illinois companies to “Escape to Wisconsin” where they would presumably find a more favorable tax climate.

Illinois individual income taxes are in the same vicinity as Wisconsin’s. In 2008, Wisconsin collected $4,331 per capita in individual income tax, representing 11.8 percent of personal income, according to data from the U.S. Census Bureau. Illinois collected $4,502 per capita (slightly higher than Wisconsin) but 10.8 percent of personal income (slightly lower than Wisconsin). Wisconsin’s personal income is lower than that in Illinois.

Illinois corporate taxes are higher than Wisconsin’s, when measured on a per capita basis or relative to income. Wisconsin collected $153 per capita in corporate income tax, representing 0.42 percent of total personal income in the state. Illinois collected $243 per capita, representing 0.52 percent of personal income.

Many factors figure into business decisions about where to locate. Tax rates can influence those decisions, but so can some of the things that those same taxes help support: a solid public infrastructure system for transporting goods, an educated population that meets workforce requirements, and safe communities where employees want to live and work. A balanced approach to filling the state budget gap can help protect these necessities. As Zach Brandon, former deputy secretary of the Department of Commerce, put it in The Capital Times article, “If it were just about taxes, every business would move to West Virginia.”

Tamarine Cornelius

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