If someone asked you how things are going here in Illinois, what would you tell them?
This week Gov. Bruce Rauner will give his answer to that question during his annual State of the State address.
But as many taxpayers here already know, times are tough. This past year was not a banner one. Illinoisans saw their state income tax jump to 4.95 percent from 3.75 percent. Many Illinois homeowners saw their property taxes go up, while their incomes remained stagnant. So it’s not surprising that 115,000 Illinoisans abandoned the state on net in 2017.
As an economist, I know that if you really want to understand what’s happening in Illinois, you need to look at three key economic indicators. And I also know how we can start to solve the state’s problems.
Illinoisans fleeing the state
Illinois ranked first in population loss among the 50 states in 2017 in raw terms, losing the title of fifth-largest state in the process. That population loss was driven by Illinois losing a record number of people to other states on net. Unfortunately, this isn’t new. Since 2010, Illinois has lost nearly 643,000 people on net to other states. That’s equivalent to the population of the four largest cities outside Chicago combined: Aurora, Rockford, Joliet and Naperville. This is also a large factor in the ongoing budget problem. As people leave, they take their wallets with them, leaving fewer Illinoisans left to pay the bills.
Illinois lawmakers need to enact policies that encourage economic growth, such as cutting taxes, making this side of the river an attractive place for businesses and families. But to be able to do this without harming core government services, the state must also bring spending under control and align it to what taxpayers can actually afford.
Can Illinoisans find good jobs?
Illinois isn’t creating jobs as fast as the rest of the U.S. Last year, nearly 100,000 job seekers in Illinois gave up on finding jobs altogether. While Illinois did gain jobs last year, 86 percent of the net new jobs, or 25,500 jobs, were created in the first two quarters of the year. Then the tax hike happened, and Illinois’ jobs growth slowed to a crawl, adding just 4,000 jobs on the net in the final half of the year.
One of the most important actions the Illinois General Assembly needs to take this year is real structural budget reform. Lawmakers should also commit to no future tax hikes. This would signal to job creators of all sizes that betting on Illinois is a good, long-term investment.
Do property taxes best mortgages?
Government data show average property taxes paid in Illinois grew more than six times faster than household incomes from 2008-2015. That means the real property tax burden – the percentage of household income paid in property taxes – increased nearly 38 percent.
The facts are clear: Property taxes are stretching the budgets of Illinois families. Property taxes can only be lowered by addressing the major cost-drivers behind local government spending. Illinois officials at the state and local level alike should start by looking at government union bargaining rules and consolidating Illinois’ 7,000 units of local government.
The most important step the governor and lawmakers must take is to rein in the cost of government. The best way to do that is to enact a spending cap for the state budget, which would ensure government spending doesn’t grow faster than people’s ability to pay. We need 2018 to be the year Illinois gets on the right path.