Poor policy decisions continue to sap Illinois’ economic activity

In the game of state competitiveness, Illinois lags the nation. Poor policy decisions continue to sap economic activity and ruin opportunities for businesses operating in Illinois.

Ben VanMetre
Senior Budget and Tax Policy Analyst

In the game of state competitiveness, Illinois lags the nation. Poor policy decisions continue to sap economic activity and ruin opportunities for businesses operating in Illinois. As a Chicago Tribune article notes:

Illinois’ poor economy means businesses are not starting up or moving into Illinois at the same pace as in other states. (Illinois ranks 47th in its level of entrepreneurial activity.) This takes a toll on families’ bottom lines. As of 2011, Illinois ranked second-worst in the Midwest in per capita personal income growth, falling behind Iowa, Kentucky, Wisconsin and Missouri.

The problem in Illinois is that political leadership has been calling the same plays for more than 30 years. More taxes, more government, more spending. It hasn’t worked. It’s time for a new game plan.

It’s often said that insanity is the act of doing the same thing over and over again and expecting different results. That’s been Illinois’ broken strategy for decades.

The good news is that Illinois doesn’t need to reinvent the wheel when it comes to reform – especially tax reform. Lawmakers in Illinois should look to North Carolina, Kansas and Louisiana, three states leading the nation with efforts to eliminate their state income taxes.

Closer to home, the Iowa House of Representatives passed a bill that would substantially improve the state’s tax code by swapping out the current progressive income tax with a flat 4.5 percent tax on income. Although this effort will be difficult to pass in the Democrat-controlled senate, the reform is a step in the right direction. The goal behind eliminating Iowa’s progressive income tax is to make the state more competitive:

Rep. Chip Baltimore, R-Boone, who managed the bill on the House floor, said the plan would make Iowa more attractive compared with other states with low or no income tax.

This is a bill that is going to benefit people of all income brackets all across the state of Iowa,” said Baltimore. “This will improve our competition with other states.”

Unfortunately, political leadership in Illinois is moving in the opposite direction. Gov. Pat Quinn said passing a progressive income tax is “one of my goals before I stop breathing.”

If Illinois is going to compete with its neighbors, the state must at a minimum repeal the 2011 income tax hike. But to become an economic powerhouse of the nation, political leadership must discern what government can and should be doing, modernize how they budget and spend and allow the private sector to thrive.