Other Views: The festering mess that is Illinois
Don't kick 'em when they're down, the adage goes. But when it comes to Illinois—grappling with a $5 billion tax increase, an unfunded pension crisis and an exodus by businesses and residents—it's too tempting to resist. So let's gloat for a moment and then examine what's behind the migration.
Since 2011, a slew of businesses have moved their corporate offices or operations from Illinois to Wisconsin. In addition, large corporations that might once have opted for Illinois have chosen southeastern Wisconsin for major facilities. Amazon has opened two fulfillment centers in Kenosha, German candy-maker Haribo is scheduled to open its first U.S. plant in Pleasant Prairie in 2020 and Foxconn of Taiwan is planning an LCD factory in Mount Pleasant.
Even absent Foxconn, manufacturing jobs in Wisconsin have increased in the past year or so—by about 3,000—according to the Bureau of Labor Statistics. During the same period, Illinois lost 6,500 manufacturing jobs.
When a state loses jobs and businesses, it eventually loses people. For the third straight year, Illinois lost more residents than any other state, over 37,000, the U.S. census says. Many of those Illinoisans are heading our way. Illinois has lost 86,000 people on a net basis to Wisconsin over the last decade, the Illinois Policy Institute reports.
James Otterstein, Rock County economic development manager, says that in “any given calendar year, approximately 25 percent of the … activity that flows through my office represents (Illinois) businesses that are evaluating their stay-and-grow versus grow-and-relocate options.”
He points to Wisconsin's many advantages, including lower worker compensation rates, lower unemployment insurance rates, lower utility rates, cheaper land and robust business development assistance.
One of the companies that moved across the border is Catalyst Exhibits, which relocated from Crystal Lake, Illinois, to Pleasant Prairie in 2011. It recovered the expense of moving in just two years and has been booming since, says CEO Tim Roberts.
Wisconsin is on a “different path” than Illinois, he says. The move was prompted by Illinois' chronic inability to solve its pension crisis and the steep costs of doing business there compared to Wisconsin, he adds.
Illinois' one big historical advantage—lower taxes—is starting to evaporate. Illinois legislators recently increased the personal income and business tax rates by more than 30 percent.
Although Wisconsin taxes remain comparatively high, there have been encouraging developments. A new batch of tax credits took effect in 2013 that virtually eliminates the tax burden on manufacturers and agricultural operations.
But Wisconsin still faces challenges. More needs to be done to bring down state income and real property taxes, and the transportation fund faces a $1 billion shortfall.
While many Illinois businesses and residents have moved to Wisconsin, we may be only at the beginning of the trend—as many Illinois businesses might not want to be around when the bill comes due for fixing the $130 billion pension mess and other fiscal problems.
Wisconsin is well positioned to receive its fair share of those businesses—and to kick Illinois' posterior for many years to come.
Jay Miller of Whitefish Bay is a tax attorney and an adjunct professor at the UW-Milwaukee's Lubar School of Business. He wrote this for the Badger Institute's Diggings magazine. Read a longer version at badgerinstitute.org.