By: Mark Glennon*

It’s not just that people are leaving because of taxes, though that’s probably the biggest problem. Long before last week’s tax increase over half of Illinoisans were telling pollsters they wanted to leave the state, citing taxes as the biggest reason.

Many of those who remain have become morally indignant about taxes without reform, which is all we got last week. They’ll do something about it. One of our commenters put it this way:

Many will stay due to jobs or family or being underwater on their mortgage…. Some things are just out of your control.

But there are things in your control. Encourage your kids to attend out-of-state universities. Unless your kid gets a scholarship or has to stick around to work through school, I see no need to give the state institutions any more of my money. Send your out-of-state acceptance letter to your local reps, showing them the $100K they’ll be losing out on. And cutoff all alumni support.

Illinois state fair? No thanks. Let it be the AFSCME company picnic it has devolved into. Send your fair business up north to Wisconsin. Cooler temps and cream puffs. Tell your reps again.

Much of that kind of activity hasn’t been quantified, or can’t be, but the anecdotal stories are overwhelming. Remember how the deniers a few years ago ridiculed what was then just anecdotal evidence of people leaving, especially big taxpayers? Census and tax data eventually backed it up. This is no different.

It’s happening within the Illinois, too. People will shop where sales taxes are lower because those rates have become so meaningful to them. One reader told me about how busy the take out Peapod location is in Deerfield, Lake County. Cook County shoppers are going there, just across the county line, to take a couple points off their sales tax.

Or a $.72 tax on a beverage six pack, as Cook County is trying to levy? That one might just infuriate people more than the taxes with much higher dollar total.

And does anybody think home buyers aren’t avoiding, or insisting on much lower prices, in the many towns with effective property tax rates over four or five percent?

It’s all aggravated by policy that’s outright hostile to business, especially in Cook County and Chicago. I got an earful last week from a CFO of a thriving tech company who heard the tax increase news while he was trying to figure out Cook County’s new paid sick day ordinance. It’s a compliance nightmare that warrants a separate story. “There’s no way I would start a company here now,” he said.

As for me, I’m writing this from a house in southeastern Wisconsin my wife and I bought recently. I figured we’d get ahead of the escape-from-Illinois crowd that’s increasingly feeding demand here. If Illinois doesn’t adopt the radical changes it needs by the time my youngest graduates from high school there, I’ll make this my permanent home — like so many Illinois ex-pats I’ve met here have done. In the meantime, we’ll buy our groceries here often, where they’re exempt from any sales tax.

Is it disloyal or selfish to avoid paying in Illinois?

On the contrary. Paying into an unreformed Illinois is what should be questioned. If you think some of the social service providers have been underfunded by the state, as I do, contribute to them yourself. Think the state universities are underfunded? Write a check. You can get money to any of those far more efficiently and selectively by doing it yourself and not through the tax collectors.

Personally, I’d be OK with higher taxes if they were needed after massive reform. Wisconsin isn’t exactly a low tax state, but it’s honest, delivers value and welcomes employers.

Illinois’ tax collections have already been dropping. Last week the state released its report for the fiscal year that  ended June 30. Tax receipts declined 3.2% — almost $1 billion from the preceding year.

I think we are well past the top of the curve — the point where higher rates result in less tax yield. Sure, tax receipts will surge for a few years. Maybe the state will get the $5 billion per year it claims — at first. It takes time to move or adapt in a way that reduces your taxes.

But it won’t hold up. Too many people are too furious. They won’t pay, one way or another.

*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.

 

 

 

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Michael
Would you like to discuss the effects of the fleeing businesses – tax losses, property values declines, jobs, and Federal representation in Congress? Indiana has a clever slogan – mountains of savings, oceans of opportunity. It only has a small strip of water on the northern border. How about a new slogan for Illinois? Back to the Future, Prairie State! Illinois steel company proposes $35M move to Indiana This company is not going to be paying IL taxes much longer. Indiana redevelopment officials will vote in August regarding a $35 million relocation project which would be completed by the end of 2018. The loss of tax revenue… Read more »
Ben Campbell
Years ago in analysing how the downwave will play out I was trying to figure out how property prices will ever make my predicted theoretical downwave price targets in real terms. Now I get it. Every time the government raises your property tax that reduces the net economic rent for the owner. Effectively they could make property taxes so high that you had to pay someone to take the thing off your hands. Right now people can leave the state, just wait till local governments get new laws to prevent such “unfair” interstate property tax arbitrage. In the end 100% of the economic rent of the home… Read more »
Doug

Something seems fishy about these GOP reps voting with Madigan. I suspect Steve Andersson’s law firm will see a big chunk of new business coming his way in the near future.

By the way, in many states the way to get out of high property taxes is to buy land that is zoned Ag. Suppose you moved to Texas. Buy land zoned Ag and you pay little or no property tax.

Ha. I bought a place in high tax Minnesota, and also a super small place in Lincoln Park. I need to be in Chicago for the short term (10 years or less). Then it’s probably Sayonara to a place like Tennessee. If they pass a transaction tax, it will be sooner than that. Chicago is going to empty out. They say it can’t be Detroit, but it can.

BTW, wanted my kids to go in state. Both went out of state. One moved back, but is okay with leaving if an opportunity arises. Many of her friends came back, many didn’t. Economic opportunity for millennials is what its about. Chicago used to have a big pull on people-but that is changing fast. Kids are finding better jobs and lower cost of living in places outside the Midwest.

bob fairfield oh (in 3 weeks)

Just wait until 2020 when the automatic, sky’s the limit property tax increases kick in to fund pensions. That was in the police fire and pension bill that Rauner vetoed last year and his veto got overridden. Your real estate won’t be worth jack when that happens. It will never be worth more than it is now.

Advocate
Goodbye Mark, I wish you the best…Enjoy your cheese-head hat. Leave our Cubs and Bears alone. The Pac and Brew crew await and embtrace with open arms. Leave your Illinois home. Enjoy the deep woods heritage of Wisconsin. Home prices fall, then create buying value opportunities for new people moving in. Buy low……Sell high. Such has happened in your old Park Forest, Its happening. A town hit as hard as anywhere in Illinois…home values down… creating buying value opportunities. The rebound has begun there. The Illinois haters can move out and will…and on thier way out …besmerch thier old home state …but just leave allready really. The… Read more »
nixit
Sending my kid to an out of state university is “akin to saying don’t buy American products”?! I know 110,000 students at UT-Austin and Texas A&M who would attest their schools are indeed American.By your reasoning, sending your kid to a private university akin to buying plutonium from North Korea. Are you implying my earnings are like Dave and Buster Power Up cards, only good within Illinois and Cook County borders? I hope not, because Illinois is that Dave and Busters where half the games are out of order and the keg lines haven’t been cleaned in years. The Cook County Dave and Busters is the one… Read more »
Advocate
Awe Nixit clearly you take my words too far. But in fairness, I opened mysely up a tad to your context. I will always advocate for freedom of choice to send your student out of state…. or out of country for that matter. Such freedom is worth dying for. And I get it….Marks main message…that people can speak with thier tax dollars….and make a statement….and thumb your nose at the tax-man at the same time. My grandpa used to drive to Indiana…just across the border…to stock up on his smokes. He used to also chase bootleggers to the border to wisconsin as enforcement. Wonder how much he… Read more »

You can fool all the people some of the time and some of the people all of the time. And those are pretty good odds if you are a politician.

Soon to be Ex-Pat
Advocate, daNile is more than a river in Egypt. I have been wanting to leave this state for a long time. I am 51 and do not have the time to wait a couple decades to go through a collapse and then rebound, think Detroit. The only thing keeping me here was the good paying job I have and family. But I now look around and see that I can get something very comparable in Indiana or Wisconsin without the dysfunction brought to us by Chicago Democrats i.e. Mike Madigan.. You can stay here and hope that there are enough uninformed millennials wanting to move here basing… Read more »
picture

It is kind funny that people in IL want to go to WI just because IL raised 1.2% state income tax. Do you guys know what is the income tax rate in WI? MUCH higher than the new raised rate in IL. Yes, maybe the sale tax is a little lower in WI than in IL, and some food has no tax in WI. But all in all, for people who have decent income, you will definitely end up paying MORE state income Tax.
Plus, the property tax in WI is almost twice as HIGH.

Mike

The State Data Lab by Truth in Accounting is a good resource for the financial health of states.
http://www.statedatalab.org
IL is F rated; WI a C.
Unfunded pension benefits and retiree healthcare are the major differences.
What’s not included in that is Local.
Local financial health varies greatly due to so many property taxing districts, local sales tax variations, SSA’s, TIF’s, bond issues, and any big tax producers in the locality.

j.a. herzrent
Every facet of this polyhedron reflects cynicism. It divides into two basic categories: “get mine” or “keep mine.” It’s the logical reaction when the public sector betrays its trust and acts for the politicians who want to keep and grow their own. An “age of reform” comes along every few decades when things get out of hand. Jefferson said as much in his quip about the tree of liberty being nourished by the blood of patriots. The crisis is well and truly at hand and the public sector has seen it coming for a while. They have been and remain intent on getting theirs. There is no… Read more »
Advocate
J.A. your words can be turned around very easily…..and you surely meant to do that. You illustrate the conudrum and the, yin and yang, aspects of your polyhedron We taxpayers have a “get mine” “keep mine” mentality. It a logical reaction to hold onto more and keep more for oneself, even if we betray our obligation to community. Yes we taxpayers are very greedy. We use legal methods to keep our tax dollars away from Uncle Sam and we also use gamesmanship to “keep mine” We come up for justifications to to keep more and give less, whenever and where ever we can. We fight taxes as… Read more »
nixit

The problem is your Paramedic hired in 2010 wants to retire at the same age as the Paramedic hired in 1960 with the exact same pension benefit. Considering medical advancements, improvements in personal conditioning, and a life expectancy that is 10 years longer for our 2010 hire, should he have the same expectation? Is it easier to climb that ladder at age 52 in 1993 or 2043?

Advocate

Come on Nixit….I get it that 50 is the new 30….or so they say…..but do ya really want the over 50 guy’s climbing the ladder to get kitty out of the tree again?

With tier two …now 67 is the standard age of retirement. Gotta climb that ladder a bit longer and older. Can you say gerital?

nixit

More like…is 55 the new 52 in Paramedic terms. You mean after two generations we can’t eek out a few more years of service out of any state employees?

And if you saw the 50+ crowd at my local gym, you’d see guys who could climb a ladder and carry a VW bug out of that tree.

j.a. herzrent
Advocate, good to hear from you again. Your confidence about what I “surely meant” misdirected your return fire to the target you keep aiming at — that somehow rich peoples’ greed was and remains the reason for the current debacle. I am not a rich person and do not live in Illinois, so I have no personal economic stake in the outcome of the controversy about whether the pot is more charred than the kettle. My point is that you (i.e., all’y’all) have reached a point of intransigence where public order is truly at risk. The trigger for chaos will probably be some sort of work stoppage… Read more »
Advocate
Interesting points as always J.A. My “target” is certainly not the rich, I have nothing against the rich, not sure how that came across. My coments were also certainly not directed at your personel monetary situation either. I wish you happiness and health the true measure of wealth. Now to some of your points…. You make a basic point that pensions will not be honored because promises made by politicians and union leaders are unsustainable. You also go on to add pensions will only be honored to the extent they are deemed by the public as in the “entitled” class or in the “non-entitled class” Lastly, you… Read more »
Advocate

I confussed your term Boyars (noble class) with burghers (middle class). Thought ya meant burghers.

The boyars or nobility are akin to pensioners as you assert….if I understand now correctly.

Though I think most pensioners would be deemed in the middle class and not upper or nobel or boyar class….with certain exceptions indeed in both ditections.

Again fun discussion.

j.a. herzrent
Advocate, My point on politicians and union leaders begins with the [unstated] assumption that pensions are “contract rights” protected by the constitution — the same sort of contract rights that can be voided by a bankruptcy court. The “promises” are part of the contract “negotiated” between the union and the governmental entity (run by politicians and other public servants). Elements of the typical negotiation involve “current pay” and “deferred pay.” Over the years, the negotiations produced both short-term promises (contracts, if you prefer) in the form of salaries and long-term promises in the form of pensions and retiree health. It’s the long-term promises that are unsustainable as… Read more »
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