Govs See Opportunity in Illinois Tax Hikes

By: - January 18, 2011 12:00 am

Last week’s dramatic personal and corporate income tax hikes in Illinois have become a favorite talking point among some Republican governors, who are openly mocking them as a sure way to drive businesses out of the state.

New Jersey’s Chris Christie said he would immediately fly to Illinois to lure firms away because of the tax-hike package, which increased the personal income rate by 67 percent and the corporate income rate by 46 percent.

“I’m going to Illinois,” Christie told The New York Times . “I mean soon. I’m going to Illinois, personally, and going to start talking to businesses in Illinois and get them to come to New Jersey.”

Christie even brought up the tax hikes in his annual state of the state speech to New Jersey lawmakers last week before Illinois Governor Pat Quinn signed them into law. Contrary to Illinois, Christie said, “New Jersey intends to remain the leader (in economic recovery), not only in turning around the national trend of out-of-control spending and taxes, but in finding the path to growth.”

Indiana Governor Mitch Daniels, Texas Governor Rick Perry and Wisconsin Governor Scott Walker are among the other Republicans who have taken delight in Illinois’ tax changes, portraying them as a gift to their own states in the always-competitive market for jobs and industry.

Referring to the tax hikes, Daniels compared his state’s location beside Illinois to living next door to “The Simpsons,” while Walker launched a campaign for firms to “Escape to Wisconsin” and promised to lower tax rates as one of his first orders of business as the state’s new governor.

Of course, Indiana and Wisconsin would have to lower their corporate income tax rates to gain an upper hand on Illinois even after the major hikes there, as The Christian Science Monitor pointed out . That’s because both states still have a higher corporate income tax rate than their neighbor.

The Monitor , however, did note that Illinois has a series of huge fiscal problems that necessitated its recent tax hikes, including a billion budget deficit, billion in unpaid bills to vendors and a worst-in-the-nation billion unfunded pension liability. Those glaring line items are likely to be more upsetting to businesses than the corporate income tax rate.

“The notion that low corporate tax rates lure business is antiquated,” tax experts told The Monitor . “Taxes pay for improved education systems, transportation, and other services that are important to businesses. Rather, what is important is a full picture of a state’s financial health, that is how (Indiana and Wisconsin) are trying to sell Illinois businesses on a move.” 

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