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* Constant state tax hike proponent Ralph Martire…
The problem is anti-tax zealots continually bombard the media with red herrings designed to sway public opinion against supporting the tax increases which the evidence indicates Illinois sorely needs. One of the most common canards is the ever-popular claim that higher tax rates kill jobs and the economy. Great rhetoric, that. It just doesn’t survive scrutiny. Consider that major, peer-reviewed studies by the Small Business Association, Congressional Budget Office, University of Missouri and the right-leaning CATO Institute and Kaufman Foundation for Entrepreneurship all found no statistically meaningful correlation between tax policy on the one hand and job/economic growth on the other. More recently, Kansas cut taxes and saw its economy nosedive, while California and Minnesota increased taxes and saw strong economic growth.
Then there’s the increasingly popular claim — also false — that the temporary tax increases of 2011 prompted Illinoisans to flee — running off to “business friendly” states like Indiana. After reviewing the data, however, a recent report by KDM Consulting found these claims simply didn’t hold water. Indeed, net out-migration is nothing new in Illinois — occurring every year but one since 1925, while Illinois’ net out-migration rate actually fell in 2011, the first year of the temporary tax increase.
Yes, more people move from Illinois to Indiana than the other way around, because Illinois has more people than Indiana. However, a greater proportion of Indiana’s population moves to Illinois than vice versa. Same holds true for Gov. Scott Walker’s Wisconsin, by the way. Which means the contention that Illinois’ temporary tax increases caused people to leave in droves is just so much malarkey.
* From that KDM Consulting study’s executive summary…
* Illinois’ out-migration is nothing new. The state has seen net out-migration every year but one since 1925.
* Illinois’ out-migration is overstated if international migration is ignored. Otherwise migrants from other countries are not counted when they move to Illinois, but are counted when they move out of Illinois to other parts of the country. Including international migration reduces net migration out of Illinois by one-third.
* Both in-migration and out-migration are tied to the economic cycle. People move when times are good and sit tight when they are bad. The 2011 income tax rate increases came as Illinois was moving out of recession, and migration could have been expected to increase.
* Illinois’ migration pattern is similar to those of its neighboring states. Illinoisans tend to move to the same states as do residents of Indiana and Wisconsin.
* Many migrants don’t move far. Illinois’ largest out-migration is to Indiana. Indiana’s and Wisconsin’s largest out-migration is to Illinois.
* Illinois is a large state so out-migration in absolute numbers is large. However, a larger percentage of both Indiana’s and Wisconsin’s population moves to Illinois than vice versa.
* Out-migration from Illinois to Indiana and Wisconsin has declined.
* Illinois net out-migration rates fell in 2011, the first year of the income tax rate increase, but increased significantly in 2014.
The full study is here.
*** UPDATE *** From the Cato Institute…
Rich,
Just to set the record straight, Ralph Martire certainly doesn’t capture the views of Cato Institute scholars in his commentary on tax policy.
Many factors determine a state’s economic vitality, to be sure, so it would be foolish to claim that taxes are the only thing that matters. However, it would be equally foolish to claim that taxes don’t matter. There is a wealth of academic literature showing, on the margin, that higher tax burdens and higher tax rates lead to less income growth, less job growth, and reduced competitiveness at the state level.
posted by Rich Miller
Thursday, Mar 17, 16 @ 12:16 pm
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Don’t let facts get in your way IPI. Hang in there.
Comment by Trolling Troll Thursday, Mar 17, 16 @ 12:25 pm
This was a paradigm shift for me. I had no idea. Great job, Ralph.
* Illinois is a large state so out-migration in absolute numbers is large. However, a larger percentage of both Indiana’s and Wisconsin’s population moves to Illinois than vice versa.
Comment by Dan Johnson Thursday, Mar 17, 16 @ 12:27 pm
This is Spin! Illinois has the second highest state out migration! The second highest property taxes! One of the highest sales tax in Cook County! Who is going to stay in this state, where spending keeps increasing, as well as taxes!
Comment by Anonymous Thursday, Mar 17, 16 @ 12:28 pm
–* Illinois’ out-migration is nothing new. The state has seen net out-migration every year but one since 1925.
* Illinois’ out-migration is overstated if international migration is ignored. Otherwise migrants from other countries are not counted when they move to Illinois, but are counted when they move out of Illinois to other parts of the country. Including international migration reduces net migration out of Illinois by one-third.–
That’s right. The country has been tilting west and south for decades.
TVA, rural electrification, water projects, interstates, etc., — all paid by the federal government, by the way. Add A/C and jet planes and there you go.
In essence, the opening of the country for mass habitation was largely funded by taxpayers in the Northeast and Midwest.
You’re welcome.
Comment by wordslinger Thursday, Mar 17, 16 @ 12:28 pm
He makes this claim 1 day after WalletHub just declared, for the second year in a row, that Illinois has the highest effective tax rate in the nation.
http://www.rebootillinois.com/2016/03/16/whats-hot/kevin-hoffmanrebootillinois-com/illinois-is-the-worst-state-to-be-a-taxpayer-for-second-straight-year/54444/?utm_source=huffpo&utm_medium=partner&utm_content=&utm_campaign=
The problem is not taxes, it’s spending.
Comment by Phil King Thursday, Mar 17, 16 @ 12:30 pm
Just so you know. Ralph is public spirited , he’s beyond narrow, self-interest. Now that taxation is cleared up, according to Ralph, how high should taxes go? Should the top marginal rate be 8% or 13.3% like in California because out-migration is going to happen anyway?
Comment by Steve Thursday, Mar 17, 16 @ 12:30 pm
Makes sense to me.
Comment by illinoised Thursday, Mar 17, 16 @ 12:31 pm
But the facts don’t fit the GOP economic myths of the last 35 years!
Maybe we are finally learning.
Comment by walker Thursday, Mar 17, 16 @ 12:32 pm
Facts can be a troubling thing.
Anyway whatever the truth is it is all Madigan’s fault.
Comment by DuPage Saint Thursday, Mar 17, 16 @ 12:34 pm
The - @MisterJayEm - rule is such a good rule…
To the Post,
The movie “Chinatown”
Explains a lot about “growth”…
Comment by Oswego Willy Thursday, Mar 17, 16 @ 12:36 pm
@wordslinger:
And we need to be careful, those folks out south and west might be coming for our water.
Sorry, you move to a place with no water…you should have thought of that before renting the truck.
Comment by Jack Stephens Thursday, Mar 17, 16 @ 12:37 pm
I always felt that rhetoric did not match reality. This study confirms it.
but thousands of Illinoisans have actually and truly been hurt by the Governor’s lack of a budget crisis.
And there is a major negative trend on IL university applications for the fall of ‘16. Those negative trends are both due to the Governor trying to burn the place down. ‘
Things might get worse before they get worser.
Comment by siriusly Thursday, Mar 17, 16 @ 12:37 pm
==Should the top marginal rate be 8% or 13.3% like in California because out-migration is going to happen anyway?==
The last time a number, much lower than that, was publically discussed by one of the leaders, all he got out if it was a label of “tax hike Mike” and no meaningful or realistic counter proposal.
Comment by AC Thursday, Mar 17, 16 @ 12:38 pm
==The problem is not taxes, it’s spending.==
Not state spending.
- Illinois is in the bottom five of the 50 states in total state expenditures per capita.
- Illinois is in the bottom two of the 50 states for the number of state employees per capita.
- Illinois is dead last in state K-12 per pupil spending.
Now property and other taxes, yes that is a different story. However, if the State of Illinois would properly fund K-12 education as its Constitution call for, then property taxes could in theory go down.
Comment by Joe M Thursday, Mar 17, 16 @ 12:39 pm
So there you have it: Tax increases make America great and our economy strong. Sounds like an election year winner. Print the bumper stickers.
Comment by JB13 Thursday, Mar 17, 16 @ 12:39 pm
==Should the top marginal rate be 8% or 13.3% like in California==
As AC mentions, those are not the numbers anyone seems to be talking about. None-the-less, one doesn’t have to go as far from home as California to see top rates higher than Illinois’ 3.75%:
Wisconsin: 7.65%
Iowa: 8,98%
Missouri: 6%
Kentucky: 6%
Minnesota: 9.85%
And last I heard, all of those states are paying their bills much better than Illinois is - and are in much better financial shape too.
Comment by Joe M Thursday, Mar 17, 16 @ 12:43 pm
=The problem is not taxes, it’s spending.=
Righhhhhhhhhhhht. /s
Comment by JS Mill Thursday, Mar 17, 16 @ 12:44 pm
- Steve - Thursday, Mar 17, 16 @ 12:30 pm:
Steve, Hope this helps.
Illinois 3.75%
Indiana 3.3% State, plus County tax of 2% which varies by county, so 5.3%
Iowa 9%
Missouri 6%
Wisconsin 7.65%
Rauner has not provided the “Executive Management” despite high dollar out of State SuperStars. Rauner needs to present a Revenue plan for his administration’s spending. There are also other revenue sources available such as alcohol and gaming taxes.
Comment by Beaner Thursday, Mar 17, 16 @ 12:45 pm
The study seems eminently well-researched and logical. Of course it will be ignored.
Comment by IllinoisBoi Thursday, Mar 17, 16 @ 12:45 pm
In a sense, the facts don’t matter, because perception is reality, and campaign ads that include the phrase “voted to raise your taxes” still have a powerful impact. You can’t sell Mr. Martire’s narrative in 30 seconds, and even if you could there has to be a listening ear to hear a message.
Comment by Saluki Thursday, Mar 17, 16 @ 12:45 pm
That darn CTBA. Always putting out facts, sources, and thoughtful analysis.
Comment by steve schynorf Thursday, Mar 17, 16 @ 12:46 pm
==Consider that major, peer-reviewed studies by the Small Business Association, Congressional Budget Office, University of Missouri and the right-leaning CATO Institute and Kaufman Foundation for Entrepreneurship all found no statistically meaningful correlation between tax policy on the one hand and job/economic growth on the other. More recently, Kansas cut taxes and saw its economy nosedive, while California and Minnesota increased taxes and saw strong economic growth.==
Yep. Time to increase taxes. The longer we wait, the greater the increase will need to be. Sooner is better than later.
Comment by Fusion Thursday, Mar 17, 16 @ 12:53 pm
Strike one: “we’re bleeding jobs”
Strike two: “we’re bleeding people”
Strike three: “the 2011 tax increase crippled our economy”
The foundation for justifying the turnaround agenda is built upon quicksand. Now that the political alibis for adhering to the agenda are gone, can we move on and pass a budget? “Hang in there”….for WHAT?
Comment by out of touch Thursday, Mar 17, 16 @ 12:55 pm
If you’re going to compare tax rates among other states, we should look at ALL taxes.Illinois has the 2nd highest property tax rate in the country. Also our sales tax rate is the tenth highest.
Comment by John Doe Thursday, Mar 17, 16 @ 1:04 pm
–”Hang in there”….for WHAT?–
Isn’t it obvious? What’s actually happening?
The “necessary shakeout.”
Only once has the governor provided an “economic and fiscal rationale” for the so-called Turnaround Agenda.
It was so laughable that when Rich printed it the governor accused him of being a Madigan hack. His own numbers, mind you.
He then promised to provide “revised” numbers.
Crickets.
The turnaround agenda is political, not economic. For crying out loud, it’s March 2016. If there was an economic basis for it, we would have seen it by now.
Comment by wordslinger Thursday, Mar 17, 16 @ 1:06 pm
Since we’re doing so well on 3.75%, the lowest in all surrounding states (who don’t have the problems we do), apparently the solution to all our state’s problems is to cut that 3.75%…….oh…..maybe in half? Perhaps that will solve the budget and pay all the backlog of bills. Isn’t that the most logical solution? /s
Comment by AnonymousOne Thursday, Mar 17, 16 @ 1:09 pm
Love me some Ralph!!!! Preach the Gospel Brother Ralph!
Comment by Honeybear Thursday, Mar 17, 16 @ 1:18 pm
According to the Tax Foundation,our Tax Freedom day is the 43rd latest of all states. Tax Freedom Day is the day when residents of that state has earned enough money to pay its total tax bill for the year
Comment by John Doe Thursday, Mar 17, 16 @ 1:20 pm
==our Tax Freedom day is the 43rd latest of all states==
Where do you think we’ll rank after all the costs of the impasse are accounted for?
Comment by AC Thursday, Mar 17, 16 @ 1:31 pm
– The turnaround agenda is political, not economic. For crying out loud, it’s March 2016. If there was an economic basis for it, we would have seen it by now. –
+1. Well said, wordslinger.
Comment by thunderspirit Thursday, Mar 17, 16 @ 1:32 pm
=Where do you think we’ll rank after all the costs of the impasse are accounted for?=
Worse for sure, but Mr. Martire thinks all our problems can just be solved by more taxes.
Comment by John Doe Thursday, Mar 17, 16 @ 1:40 pm
You all keep bringing up the total tax picture and property taxes etc. The State can control state spending. The State can not control local government spending. You need to take those issues up with each taxing body listed on your property tax bill.
Yes, the State could increase its spending for K-12 education, which in theory could reduce local property taxes. But that would require more State money - and there is no more state money unless we have more state revenue. State money is at least $4 billion short already, unless one wants to eliminate state higher education in Illinois completely, along with many other social programs. For those of you who feel that the State can cut its way out of its budget crisis, please specify which state programs you want to see cut!
Comment by Joe M Thursday, Mar 17, 16 @ 1:41 pm
@John Doe, that “2nd highest property tax rate in the country” is not a great line because its methodology is odd in that it excludes multi-family home and some commercial property taxes, which, a state with the third largest city in the country would have more of than most states.
Don’t go all straw-man and say I’m saying the tax levels are already perfect, but that tired 2nd highest line bugs me because its so far out of context I itch when I see it.
Comment by CD Sorensen Thursday, Mar 17, 16 @ 1:43 pm
John Doe, your ad hominem attacks on Martire do nothing (not by accident, I suspect) to refute the researched and sourced facts he presents. Martire 1, you 0.
Comment by steve schnorf Thursday, Mar 17, 16 @ 1:45 pm
==Mr. Martire thinks all our problems can just be solved by more taxes.==
I’m not sure that’s entirely true. Regardless, though, he is right that the problem cannot be solved without a tax increase being part of the solution.
Comment by Demoralized Thursday, Mar 17, 16 @ 1:49 pm
From the WalletHub piece:
The five states with the lowest tax rates are Alaska (5.69 percent), Delaware (6.02 percent), Montana (6.92 percent), Wyoming (7.45 percent) and Nevada (7.72 percent).
LET’S ALL MOVE TO ALASKA!!!! OR MONTANA! OR WYOMING?
Wait, you don’t want to move Montana to enjoy those sweet, sweet tax rates? Why the heck not? (Please show your work.)
Comment by Soccermom Thursday, Mar 17, 16 @ 2:11 pm
Ralph Martire was correct about pensions and he is correct about taxes. Ralph does not believe in magic wands or pixy dust so he is out of step with much of the Illinois citizenry.
Comment by Facts are Stubborn Things Thursday, Mar 17, 16 @ 2:16 pm
Joe M
I agree with you but would change one word…….For those of you who feel that the State can cut its way out of its budget crisis, please specify which state programs you want to see ELIMINATED.
Cuts alone won’t get it done. Some may argue with Ralph but the math is indisputable. BTW Wallet Hub is a pretty lame source. It’s like the ads at the bottom of the browser…..”Improve your credit score with this simple trick” etc. Internet junk info.
Comment by Old and In the Way Thursday, Mar 17, 16 @ 2:21 pm
=Wait, you don’t want to move Montana to enjoy those sweet,sweet tax rates? Why the heck not? (Please show your work.)=
I may not want to live in the state with the lowest taxes, but I’d sure not want to live in the 51st lowest state.
Comment by John Doe Thursday, Mar 17, 16 @ 2:24 pm
=but I’d sure not want to live in the 51st lowest state.=
FYI- this maybe new but there are only 50 states.
Just trying to help.
Comment by JS Mill Thursday, Mar 17, 16 @ 2:29 pm
“* Constant state tax hike proponent Ralph Martire…”
The marginal tax rate could be 99 percent and Martire would still want the rate to go higher.
His group’s funders are primarily government unions. AFSCME gave $75,000 in 2014. IEA gave $40,000 in 2015. SEIU gave $25,000 in 2014. AFL-CIO gave $25,000 in 2015. Look at the board. Unions reps as far as the eye can see. Someone needs to scrounge up the cash for their spending.
Comment by True That Thursday, Mar 17, 16 @ 2:35 pm
Martire AND IPI both have valid arguments and both select data that supports their causes.
The absolute undoubtable cause of the problem is the Illinois politicians over the last 30 years who have been irresponsible with spending and pensions. When Edgar opened the door to the pension holiday ramp, the toilet started flushing.
Comment by Rhino Slider Thursday, Mar 17, 16 @ 2:36 pm
Outside of providing information about out-migration from the 2011 tax increase, i’m not sure what the usefulness of this study is. This is a very narrow study over a short amount of time, I’m not really sure how much I would use it when making a policy decision or formulating an opinion. I guess the point is, people will leave no matter what, so lets just raise taxes?
For what it’s worth, taxes matter to those with more money. What we’re seeing is people with more money leaving, immigrants who make less money coming in. Our tax revenue grows slower while our need for social services grows faster. Maybe we should have a balanced approach where we don’t have wealth leaving the state?
Comment by Ahoy! Thursday, Mar 17, 16 @ 2:38 pm
=Martire AND IPI both have valid arguments and both select data that supports their causes.=
The key difference is that Martire realizes that you cannot just skip out on the pension. IPI, not so much.
It is a big difference.
=The marginal tax rate could be 99 percent and Martire would still want the rate to go higher.=
Please stay off the computer until your mommy and daddy get home and teach you how to use it properly.
Comment by JS Mill Thursday, Mar 17, 16 @ 2:43 pm
===over a short amount of time===
1925 through 2015 is a short amount of time? Dude, that’s 90 years.
Comment by Rich Miller Thursday, Mar 17, 16 @ 2:44 pm
==The marginal tax rate could be 99 percent and Martire would still want the rate to go higher==
Can you say “straw man argument.”
Comment by Demoralized Thursday, Mar 17, 16 @ 2:46 pm
John Doe 2:24
If you truly feel that way, please feel to leave. Maybe with your out-migration, we can get two from Indiana that want to be here and help solve problems, rather than just speak the GOP line.
Comment by Common Sense Republican Thursday, Mar 17, 16 @ 2:50 pm
Once again, everyone’s comparing IL rates to surrounding states but leaving out one inconvenient fact: each one of those states tax retirement income.
Comment by nixit71 Thursday, Mar 17, 16 @ 3:01 pm
As much as any Chicagoland statistics skew statewide numbers, I think (and I hope Ralph Martire, Illinois Policy Institute, or whomever else writes about the state’s negative domestic migration sees this) that Illinois’ negative net domestic migration would be lower if Chicagoland could increase housing supply. Places with high housing costs, like Chicagoland, have high costs because housing demand exceeds supply & prices rise until enough demand goes elsewhere to make up for it. This happens because of things like local zoning rules. For example, Wrigleyville has housing costs that clearly show much greater demand in the area than is supplied, but yet zoning rules generally prevent any buildings from being built there taller than 4 stories.
Comment by Nick Thursday, Mar 17, 16 @ 3:09 pm
CTBA once misrepresented Adam Smith in saying that he supported a progressive tax (wrong). At least CATO is around to defend the truth.
Comment by A. Smith Thursday, Mar 17, 16 @ 3:17 pm
=If you truly feel that way, please feel to leave=
So,are we supposed to like living in the state with the highest overall taxes?(Actually Illinois only has the 7th highest overall taxes). I’d be happy if we just had average taxes.
Comment by John Doe Thursday, Mar 17, 16 @ 3:20 pm
= but leaving out one inconvenient fact: each one of those states tax retirement income.=
I agree.Instead of just raising rates, we should broaden the scope of the sales and income taxes.
Comment by John Doe Thursday, Mar 17, 16 @ 3:27 pm
As one of the authors of the study its clear to me that while some have, other respondents have not read the actual study. Illinois’ net out-migration rate spiked to rust belt era levels in 2014 - not in 2011 as has been inferred in existing reports. Our analysis uses all available state level data as reported by the federal government. Moving company statistics are inherently biased but can used to supplement representative sample or population data. We ask those who care about Illinois to help our policy makers understand the whole picture about what has happened in Illinois since 2014. Partisan responses are not going to do anything to help address the REAL underlying problems and issues. We hope our report will be contribute to a mature discussion about Illinois’ future.
Comment by Natalie Thursday, Mar 17, 16 @ 3:40 pm
@ John Doe:
“… we should look at ALL taxes.” … Yes, but we should then look at the total effective personal tax RATE (considering ALL state and local taxes) as a function of personal income.
“… our Tax Freedom day is the 43rd latest of all states.” Each taxpayer has an individual Tax Freedom Day based on their individual effective tax rate (on all taxes). How was the statistic you quote computed? Was it average, median, something else?
The effective tax rate for the top 1% in IL is about half the national mean value, so their Tax Freedom Day must come much earlier than the national average. Middle and low-income tax payers pay as much as 30-40% above the national mean, so their Tax Freedom Days must come later.
The wealthy in IL enjoy a very low effective tax rate on a disproportionately large share (compared to historical norms) of the state’s total personal income. Middle and low-income taxpayers bear higher rates on shrinking shares of the state’s personal income. These results reflect (a) IL having one of the most regressive tax systems in the nation and (b) historically high levels of income inequality nationwide. This combination is, objectively, unsustainable. It’s also unjust in my opinion.
Comment by X-prof Thursday, Mar 17, 16 @ 4:00 pm
It just confirmed what Illinois needs to do, change our State constitution and allow for a progressive income tax just like all of these other States.
Comment by Chicago 20 Thursday, Mar 17, 16 @ 4:34 pm
Apparently taxing all retirement income would be a gold mine since we all know that the real billionaires hoarding their cash are the elderly, aren’t they? /s
Comment by Anonymous Thursday, Mar 17, 16 @ 4:39 pm
I get the gist of net migration at the state level but I think may not explain all that is going on within Illinois.
What isn’t addressed is the change in the patterns of population around Chicago’s outer suburbs. In the previous decade Kendall was among the fastest growth areas in the US. Kendall is now growing at a fraction of its rate in the previous decade. McHenry has lost population since the 2010 Census which is also out of character with its prior growth.
Comment by muon Thursday, Mar 17, 16 @ 5:25 pm
Martire is an actual intellect pushing reason over conservative pedanticism. Martire for Gov!
Comment by Phoenix Thursday, Mar 17, 16 @ 5:47 pm
As a researcher who helped advise on this report, seems some of the comments are a bit extreme here— there is indeed evidence that taxes do influence migration. But taxes are just one factor among many, as this study makes clear, and long-term geographic or demographic relationships are very important.
I hope, as a frequent migration researcher, Illinoisans won’t get from this report the idea that taxes have zero impact on migration. That would be a very sad misreading. Rather, the truth is that taxes are one component among many, and changing tax policies alone can’t fix a very long-term problem.
Comment by Lyman Stone Friday, Mar 18, 16 @ 5:11 am