NCPA - National Center for Policy Analysis

Illinois Exit Fee

January 14, 2011

Jubilation has broken out in the Midwest -- or at least in Wisconsin and Indiana, now that Democrats in neighboring Illinois have rushed their tax increase into law, says the Wall Street Journal.

  • Late Tuesday night, Democrats in the Illinois House and Senate rammed through Governor Pat Quinn's 67 percent hike in the state income tax and a nearly 50 percent jump in the state corporate tax.
  • The increase will add $1,400 to the average family's tax bill, and will not likely help job creation in a state that has lost 374,000 jobs since 2008.

New Wisconsin Governor Scott Walker immediately rolled out a press release inviting Illinois businesses to decamp to the Badger State, contrasting his agenda to reduce taxes and welcome business with the Illinois increase.  Indiana Governor Mitch Daniels added: "We already had an edge on Illinois in terms of the cost of doing business, and this is going to make it significantly wider."

  • Illinois' small businesses will pay the new 5 percent income tax rate, up from 3 percent, and the effective corporate tax rate will rise to 9.5 percent, which, when combined with the federal rate of 35 percent, will make the Land of Lincoln one of the most expensive places in the world to conduct business.
  • Democrats say the higher rates will raise $7 billion to help close an estimated $14 billion budget gap, though tax hikes rarely raise the revenue that politicians promise.
  • Rather than fix the state's $150 billion unfunded pension problem, the bill also authorizes nearly $4 billion in new debt to fund the state's pension payment this year.

Source: "Illinois Exit Fee," Wall Street Journal, January 13, 2011.

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