Ep. 56: The truth about Illinois’ economy
This week’s Policy Shop is by Director of Fiscal and Economic Research Bryce Hill.
We’re about one month out from midterm elections across the country. Foremost in voters’ minds? The economy.
Will Illinois’ gubernatorial candidates dodge this topic, or give it the focus it deserves? We’ll find out as Gov. J.B. Pritzker and Republican challenger Darren Bailey prepare for their first debate tomorrow.
Until then, here’s what Illinois voters need to know about our state’s economy:
1. Jobs. The most recent jobs report and 2021 State of the State paint a bleak view for jobs in Illinois. The state’s unemployment rate was finally back in line with the national labor market picture in 2019, and then COVID-19 hit. Illinois lost fewer jobs than other states, but we also have faced a much weaker recovery. While other states have fully regained jobs lost during the pandemic downturn, Illinois isn’t quite back to its 2020 starting point. Our unemployment rate is among the highest in the nation and much higher than before COVID-19.
A report published by the Federal Reserve Bank of St. Louis suggests Illinois’ COVID-19 lockdowns and its use of federally funded, enhanced unemployment benefits have likely contributed to the state’s slow recovery.
2. Taxes. $5 billion in new taxes and fees under Pritzker have hurt the economy, not helped. In addition to the 24 tax and fee hikes that occurred during the administration, the state’s budget ballooned to $46 billion, the largest in state history. It included direct payments and rebates plus suspension of taxes or tax increases, which were all short-sighted, temporary policies meant to bolster Pritzker’s reelection campaign. They have likely contributed to the higher inflation we’re seeing in Illinois compared to neighboring states.
3. Business. Illinois small businesses are currently anticipating layoffs or hiring freezes. The state was the third worst for growth in high-propensity (likely to create jobs) business applications in 2021. While there are lots of people trying to start businesses (a stat Pritzker touts), being the third-most regulated state means relatively few of them are successful in getting to open their doors. Illinois is one of the only states in the region to see its business tax climate ranking fall since 2017. It’s not just small businesses who are struggling. Boeing moved its headquarters to Virginia after 20 years in Chicago. Then Caterpillar announced it was moving 230 corporate jobs to Texas after nearly 100 years in Illinois. Citadel moved to Florida, Highland Ventures to Nashville and FTX to Miami. Tax burdens on businesses are killing jobs across the state.
Regulations are also hitting businesses hard. Illinois has the nation’s third-highest number of state regulations, making growth difficult for Illinois’ small businesses, where most Illinois jobs are created.
Illinois’ regulatory code has 278,475 individual restrictions and requirements, according to data compiled by the Mercatus Center at George Mason University. Of the 46 states where data was available, states averaged 133,000 regulations – meaning Illinois doubled the average.
Jobs, taxes and business are all impacted by government policy decisions, so the person wanting to fill Illinois’ highest office needs to share how he will address them. Property taxes are being driven up by the need to fund unsustainable public pensions. People are leaving because of jobs and taxes, costing Illinois a congressional seat in Washington.
Illinois is the beating heart of the Midwest. Job No. 1 for the new governor is fighting for policies that remove unnecessary regulations and reduce the tax burden to make it easier for workers and small business owners to keep our state’s economy humming.