Illinoisans most likely to move out would see higher taxes under Pritzker plan

Illinoisans most likely to move out would see higher taxes under Pritzker plan

Other states show how a progressive income tax would likely make the Illinois exodus worse, pushing jobs and tax revenue out of Illinois.

Shortly after U.S. Census data confirmed Illinois lost people for the sixth straight year, IRS data – which lags Census data by a year – showed who was leaving the state. Topping the list were those earning more than $200,000, who were twice as likely to move away as other Illinoisans.

Illinois’ population decline is the second-longest streak in the nation, and it is solely from more Illinoisans leaving than people arriving from other states. In 2019 alone, 105,000 Illinoisans left on net: roughly 288 residents per day, or one person every five minutes.

Lawmakers are asking voters on Nov. 3 to approve a massive progressive income tax hike, operating under the assumption that it would have no effect on the migration decisions of the very group that is twice as likely to leave.

But taxes are the No. 1 reason Illinoisans say they want to leave. And Illinois Gov. J.B. Pritzker is specifically proposing to raise $3.7 billion in state taxes on those who are already leaving at double the rate. So what is the reasoning behind Pritzker’s contention that his tax hike won’t push out more Illinoisans?

Other states’ experiences show what a progressive income tax hike would likely do to Illinois.

New York was the only state to see a higher share of residents making more than $200,000 leave in tax year 2018 than left Illinois. New York Gov. Andrew Cuomo put it this way: “‘Tax the rich! Tax the rich! Tax the rich!’ We did. Now, God forbid, the rich leave.”

California already conducted a similar experiment with state tax policy, and nearly half of the expected revenue evaporated along with residents. Instead of increasing funding for education and putting the state on a firm fiscal footing as voters were promised, a major progressive income tax hike in California was diverted mostly to pensions. Funding for many services now makes up a smaller share of the budget than before.

new paper by Stanford University researchers shows wealthy residents were about 40% more likely to leave after a progressive income tax hike passed in 2012. Those departures and other responses to higher taxes eliminated 45.2% of the revenue California expected to get from high earners. The “temporary” tax is still in place, and the continuing budget pressures have hurt California’s middle class.

In the past 30 years, three states dumped their progressive taxes and only one has imposed a progressive tax: Connecticut. That state saw a 13% spike in middle-class income taxes, 64,000 more residents in poverty, 362,000 fewer jobs and a $10 billion hit to Connecticut’s economy.

The experiences of other states with progressive income tax hikes show that if Pritzker tries to treat Illinoisans as “cash cows,” they will likely leave before he gets to milk them. Eliminating Illinois’ constitutional flat tax protection will give lawmakers greater power to tax middle-class Illinoisans to make up for lost revenue.

There is no reason to believe Illinois can escape the history lessons of other states, or that residents won’t do what they already said they would do and have been doing for six years – fretting about taxes and leaving.

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