Posted July 20, 2013 11:24 pm by with 9 comments

‘How Money Walks’ — Especially from Illinois
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If you wonder what out-migration does to Illinois’ tax base, take a look at numbers compiled by Travis Brown, author of How Money Walks. They are devastating.

 

Between 1995 and 2010, based on data from the Census Bureau and and the IRS, 42 million Americans moved between states — about one-seventh of the population — taking with them $2 trillion of annual net adjusted gross income (“AGI”, as defined by the IRS). Florida, Texas, and other low tax states hit the jackpot. Illinois got hammered, along with California, New York, Ohio, and New Jersey.

 

Illinois lost 537,000 people who took with them $29 billion in annual AGI, a staggering loss to our income tax base. Keep in mind this is based on numbers through 2010, before the 66% increase in individual income taxes, which surely sped the exodus.

 

A nice interactive graphic of all the state data is linked here and a CNBC video with Mr. Brown about his work is here.

 

You should not be surprised. Earlier reporting showed Chicago has the second largest exodus of major American cities; Crain’s published numbers about revenue lost throughout Cook County; and data from van lines have shown the out-migration. This new work shows the direct impact on the state’s tax base, but surely the damage goes much further. Most of the income those taxpayers took with them likely would have been spent here had they stayed, buying goods and services here, employing more people…all of which would have generated more tax revenue.

 

On one particularly important point, Illinois government does not collect the data, probably because the results would be embarrassing.  Specifically, the exact numbers on how many high income taxpayers are leaving the state is are not collected, though the evidence that they are is overwhelming. Those numbers would be especially important to have because high income taxpayers are the ones tax increase proponents think they can soak to solve our fiscal mess.

 

“It’s a revenue problem” according to some — just raise taxes.  No. Higher rates will only spike the exodus and further erode our tax base.

 

Illinois is burning. Our problems remain worse than understood.

 

Mark Glennon

h&m

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9 responses to ‘How Money Walks’ — Especially from Illinois

  1. Art July 26th, 2013 at 12:35 pm

    Basically, the real reason why states fail are the unions. I live in Pennsylvania and Philadelphia is experiencing financial problems. However, the mayor is cutting back on may programs and hopefully, the city will eventually have a balanced budget – despite the unions.

    I looked at some of the pensions obligations in Chicago. Some people collect over100K a year. Police in retirement collect over 50K a year. Absolutely nowhere in the private sector do you have pensions of that magnitude. Quite the contrary. Most private firms have eliminate or curtailed pensions in lieu of 401K plans.

    How can public unions justify pensions of that magnitude when so many Live on 20K- 40K a year in retirement.

    Even if you rationalize that the obscene pensions that these people collect are the result of not being eligible for Social Security – there Still a disconnect.

    Go out to the Social security site and indicate that your ending Salary is 120K a year. Look at your monthly payout. Multiply it by 12 , and that is your yearly social security allotment. Lets include say 20K a year from an annuity that you invested your 401k. Do the math.

    Public pensions are so far out of line that at times I think I hear Rod Serling introducing a new episode of the “Twilight Zone” . It is time to reign in , or even eliminate public unions. Outsource services to the private sector. Have open bids for services.

    Thanks

    Art

    Reply

  2. Anonymous July 23rd, 2013 at 9:50 pm

    The taxes in Vermont are far more brutal, and they haven’t lost people. All the blue states pay more taxes to the feds than the red states which take more back from the Feds than they put in. This is an indicator of the high level of economic activity in the blue states. I would want to see more proof that it is not retirement, where people take the money they never could have earned in the south and spend it where it is cheaper and warmer to live.

    Reply

    • Mark Glennon July 24th, 2013 at 3:57 pm

      Fair points, but the main lessons are that people are leaving and they are taking lots of income with them.

      Reply

  3. Opa July 23rd, 2013 at 9:39 pm

    Your article makes the common error of presenting correlation as causation. People have migrated from Illinois, that’s a fact. However, that does not prove it was because of taxes. In fact, Illinois is not a high tax state at all. Sure, some states have no income tax, but you can be sure they get their money in other ways. My daughter moved from Pittsburgh to rural Kentucky and expected to pay far less for auto insurance, as one example. Wrong! Kentucky charges multiple taxes on auto insurance and countless other services, as do many other states. You need real evidence to link the Illinois population loss to taxes.

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    • Mark Glennon July 24th, 2013 at 3:51 pm

      You can never prove causation. But when the correlation is there and people are saying they are moving because of taxes, you get a pretty good idea. Illinois is now, after the 2011 tax increase, a high tax state according to analyses that count everything — property taxes, sales taxes and the rest. Rankings on all taxes from various sources are collected here: http://illinoispolicy.org/blog/blog.asp?ArticleSource=6118

      Reply

  4. TMS100 July 22nd, 2013 at 10:57 am

    Oh, and love the new look. The content has always been awesome.

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  5. TMS100 July 21st, 2013 at 12:48 pm

    But people move for other reasons, right? Warm weather for retirees?

    Reply

    • Mark Glennon July 21st, 2013 at 3:42 pm

      Yes, for sure. But look how clearly the migration is from high tax to low tax states, and combine that with how strongly people are saying they are moving for tax reasons. More importantly, while we could debate why they are moving, it’s undeniable that they are moving and taking our tax base with them. Let’s at least first get an honest understanding of how bad things are.

      Reply

  6. Anonymous July 21st, 2013 at 11:03 am

    Should be front page news. Kudos for finding this.

    Reply

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