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 Shortly after U.S. Census data confirmed Illinois lost people
for the sixth straight year, IRS data – which lags Census data by a year –
showed who was leaving the state. Topping the list were those earning more than
$200,000, who were twice as likely to move away as other Illinoisans.
Illinois’ population decline is the second-longest streak in the nation, and it
is solely from more Illinoisans leaving than people arriving from other states.
In 2019 alone, 105,000 Illinoisans left on net: roughly 288 residents per day,
or one person every five minutes.
Lawmakers are asking voters on Nov. 3 to approve a massive
progressive income tax hike, operating under the assumption that it would have
no effect on the migration decisions of the very group that is twice as likely
to leave.
But taxes are the No. 1 reason Illinoisans say they want to leave. And Illinois
Gov. J.B. Pritzker is specifically proposing to raise $3.7 billion in state
taxes on those who are already leaving at double the rate. So what is the
reasoning behind Pritzker’s contention that his tax hike won’t push out more
Illinoisans?
Other states’ experiences show what a progressive income tax hike would likely
do to Illinois.
New York was the only state to see a higher share of residents making more than
$200,000 leave in tax year 2018 than left Illinois. New York Gov. Andrew Cuomo
put it this way: “‘Tax the rich! Tax the rich! Tax the rich!’ We did. Now, God
forbid, the rich leave.”
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California already conducted a similar experiment
with state tax policy, and nearly half of the expected revenue
evaporated along with residents. Instead of increasing funding for
education and putting the state on a firm fiscal footing as voters
were promised, a major progressive income tax hike in California was
diverted mostly to pensions. Funding for many services now makes up
a smaller share of the budget than before.
A new paper by Stanford University researchers
shows wealthy residents were about 40% more likely to leave after a
progressive income tax hike passed in 2012. Those departures and
other responses to higher taxes eliminated 45.2% of the revenue
California expected to get from high earners. The “temporary” tax is
still in place, and the continuing budget pressures have hurt
California’s middle class.
In the past 30 years, three states dumped their progressive taxes
and only one has imposed a progressive tax: Connecticut. That state
saw a 13% spike in middle-class income taxes, 64,000 more residents
in poverty, 362,000 fewer jobs and a $10 billion hit to
Connecticut’s economy.
The experiences of other states with progressive income tax hikes
show that if Pritzker tries to treat Illinoisans as “cash cows,”
they will likely leave before he gets to milk them. Eliminating
Illinois’ constitutional flat tax protection will give lawmakers
greater power to tax middle-class Illinoisans to make up for lost
revenue.
There is no reason to believe Illinois can escape the history
lessons of other states, or that residents won’t do what they
already said they would do and have been doing for six years –
fretting about taxes and leaving.
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