As background: the State of Illinois has the worst credit rating of any state, has chronic budget deficits, and the City of Chicago is in even worse financial shape. Instead of addressing structural problems to reverse its situation, the state doubled the income tax rate in 2012. Three years later, Chicago had the largest property tax increase in history, by $1,750 per household.

The State of Illinois just passed a new budget that included a series of additional tax increases: sales tax, income tax, and business tax. Not only were Taxes increased, they are retro-active back to January 1, 2017, a year and a half ago. Going forward, the average Illinois household will pay an additional $1,125 per year.

A few details of their new plan:

• Income tax will be 4.95%
• Corporate income tax will be 7%
• Sales tax of 6.25% is expanded to many other services
• Increases in cable and satellite TV taxes
• Reductions in business deductions

By raising all kinds of taxes, the state can ignore its runaway spending and increasing pension liabilities.

As long as residents allow more tax increases, then state unions and politicians will have no interest in changing from pensions to affordable 401(k)-type retirement plans.

Let’s review a few of the effects, so far, from the Illinois state government mis-management:

1. Since 2013, there has been a steady and increasing stream of companies moving from Illinois to neighboring Indiana, and some to Missouri or Wisconsin. Not only small businesses but large manufacturers such as Mitsubishi Motors, Heinz, and General Mills. Although global giant, Caterpillar, is headquartered in Illinois, the company CEO, Doug Oberhelman put it bluntly, “We are building dozens of new factories in other states and Illinois is NOT in the running for such projects.”
2. There has been a net migration of residents leaving Illinois for years. I know a family that moved from Chicago to Missouri last year because they didn’t see the “tax increase train” turning around anytime soon. And they were afraid of some new government fiasco would unexpectedly damage their home’s value. Think about this: they left the state because of their fear of even more catastrophic moves by the Illinois government.
3. To avoid high Illinois prices, many residents already travel to Indiana to buy regular goods. Now, an increasing number of people from Illinois drive to Indiana to purchase any big-ticket items like appliances or vehicles.
4. Chicago’s Mayor has jacked up the cost of every minor fine, tax, permit, sticker, and fee the city can get its hands on.
5. Even worse, local court systems are financially supporting themselves with aggressive “civil asset forfeitures.” This means randomly impounding your car for huge fines or just stealing your car and auctioning it off and keeping the cash. Social media, particularly around Chicago, has all kinds of stories of “pulled over for an alleged broken tail light” and only getting their car out of impound after thousands of dollars. The city and county each play by their own rules so the city can dismiss a case against you and yet the county couldn’t care less – they’ll still keep your car.

Illinois has a few other self-inflicted business problems: the 4^th highest business tax, ranked 42^nd in regulatory burden, 4^th highest workers compensation insurance, and it is not a Right-to-Work state (no forced union membership). So the State of Illinois continues to be uncompetitive compared to its neighboring states, kicking the can down the road for reductions in pensions and spending, and continuing its worst-in-the-nation credit rating.

What did the famous Nobel-winning economist, Milton Friedman of the University of Chicago say about this type of situation 50 years ago? “Higher taxes never reduce a deficit. Governments spend whatever they take in, and then whatever they can get away with.”

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