More evidence big taxpayers are fleeing Illinois – WP Original
November 7, 2013 By: Mark Glennon
Spend some time collecting signatures on petitions in high income areas like Kenilworth, Lake Forest or Winnetka to put candidates on the ballot for Illinois elections and you’ll too often hear something like this: “Sorry, I’ve changed my residence out of state,” or “I vote in Florida now.” Still more people joke about it, saying they intend to change their legal residence soon. I’ve heard it myself collecting signatures in those places and repeatedly from volunteers working with me on a petition drive.
For the very wealthy — folks with second or third homes elsewhere — changing residence to a lower state tax isn’t difficult. Typically, they change their driver’s license, voter registration, and keep a calendar purporting to show they spend half their time in the low tax state where they have another house. That’s all it takes. That’s what tax planners for the very wealthy say is exploding. A partner at a leading Chicago law firm told me their Trust & Estates Department has been busy redoing estate plans for the wealthy to reflect outbound residence changes.
That’s no doubt music to the ears of the Madigans, Cullertons and class warriors of Illinois since most rich folks vote against them. Plenty of others in Illinois simply deny the problem: no proof, they say, that tax policy and fiscal problems influence migration.
In reality, the proof has become overwhelming, though anecdotal and indirect, which we’ve described before: “Money walks,” as one study put it. 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. If you doubt that many of the very wealthy are changing their residence to avoid Illinois taxes just do this: Ask ask some of their tax preparers.
You’d think the state would systematically collect data on the problem, but it doesn’t, which is a scandal in itself. Ask a legislator how much revenue a tax increase on the rich would really yield — whether an increase in rates on the rich would be offset by a reduction in the number of wealthy taxpayers. And ask him how he knows. I’ve asked many of them. They don’t know. They are driving blind. The state could easily study tax returns and get exact data on the issue, but we already have good indications of what it would show. The rich are fleeing Illinois and the consequences are dreadful. For Springfield politicians, however, it’s better not to collect data officially lest the public will know.
Many who sniff at this problem think tapping the rich will solve our fiscal crisis. Not if they leave. The top one percent pay 16% of Illinois income tax even with flat rates. Keeping them here is essential. I work with technology startups in Illinois, one of the few things working and growing employment. In that sector, the very wealthy comprise the leading angel investors who invest the seed money that’s an essential piece of that ecosystem. Increasingly, they’re gone for large chunks of the year and unavailable to look at Illinois investments. One prominent Chicago angel investor told me “everybody in my building is doing it” — referring to his fancy North Michigan Avenue condo building and changing residence.
Illinois may not be killing its golden geese but it sure is chasing them out.