Illinois Gets a ‘C’ in Factory Ranking
by Sameer Warraich Last week, Crain’s Chicago Business reported the results of recent research on the manufacturing performance of all 50 states. The study, by Ball State’s Center for Business and Economic Research, gave each state a grade based on criteria including manufacturing and logistics health, human capital, cost of benefits, global position and diversification of industries,...
by Sameer Warraich
Last week, Crain’s Chicago Business reported the results of recent research on the manufacturing performance of all 50 states. The study, by Ball State’s Center for Business and Economic Research, gave each state a grade based on criteria including manufacturing and logistics health, human capital, cost of benefits, global position and diversification of industries, state level productivity and innovation, tax climate and venture capital activities. Unsurprisingly, Illinois got a ‘C’, behind five of its six neighboring states.
Based on the research, Illinois earned Ds on tax climate and benefit costs but what stood out the most for manufacturing companies was the unfunded liabilities for public employee pensions. With unfunded liabilities of more than $86 billion, Illinois has one of the highest levels of debt per capita in the nation. This coupled with a recent 46 percent corporate tax hike has led many manufacturing companies to relocate to other states. Various companies’ spokesmen have been complaining about the “bad tax environment” in Illinois. According to Michael Hicks, director of Ball State’s Center for Business and Economic Research, Illinois’s ‘D’ grade on taxes doesn’t capture the increase in personal tax that the legislature passed. “You’re probably going to move from a D to an F on tax climate next year,” said Mr. Hicks, adding that Illinois will likely drop to 40th on that measure next year. “This is a bad time to have ugly taxes.”
If this wasn’t bad enough, a new study by the Mercatus Center ranked Illinois 41/50 for overall state freedom. Illinois ranked 49/50 for personal freedom and 29/50 for economic freedom. These rankings also don’t take into consideration the personal and corporate income tax increases of 2011 and serve to foreshadow what is in store for Illinois’s rankings next year.
Illinois is currently suffering from the third worst job loss rates in the nation, and with the recent trends shown by the two studies above, Illinois’s economic outlook appears gloomy. Perhaps, Illinois lawmakers need to learn a lesson from Texas, which has added 265,300 jobs, representing 37 percent of all net U.S. jobs in the economy since June 2009. Unlike Illinois, Texas does not have a state income tax and is a right-to-work state.
For years, Illinois has been losing population to its neighbors, including Indiana and Wisconsin. Illinois can reverse this out-migration by decreasing personal and corporate income taxes, limiting government spending and addressing the $86 billion pension crisis.