Lower taxes fuel economic prosperity

Lower taxes fuel economic prosperity

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As Gov. Pat Quinn and the Illinois General Assembly enter into the final weeks of their regular session, they may want to put the state on a new path.

Quinn and the Democrats appear to be headed for some time of tax increase. Quinn wants to make the temporary tax increase imposed in 2011 permanent. Other Democrats are seeking a progressive tax plan in the state, which may well be another way to raise taxes.

The Wall Street Journal in a recent editorial, called ``What's wrong with Illinois?'' showed the danger behind such a plan.

``Democrats in Illinois have been pursuing their blue-state model of higher taxes and union-dominated government,'' the Wall Street Journal wrote. ``Neighboring states since 2010 have gone for lower taxes and union reform.''

In a comparison between Illinois, Indiana, Michigan, Ohio and Wisconsin, here's what the Journal found out:

  • Illinois was the only state to raise taxes. Michigan reduced corporate taxes and Ohio had an overall tax cut. Indiana passed a right-to-work law and Wisconsin reformed collective bargaining.
  • It's difficult to compare the mix of taxes between states, but it's clear that Illinois is near the top. While the income tax rate at 5 percent is lower than Ohio and Wisconsin it is higher than flat rates in Michigan and Indiana. But Illinois residents pay higher sales taxes and property taxes in Illinois the second highest in the nation.
  • Since 2010, the Illinois unemployment rate has dropped 0.7 percent. During that same time period, the unemployment rate in Michigan – home to bankrupt Detroit – dropped from 11 to 7.7 percent. The other state saw unemployment rate drops of similar sizes.
  • Personal income, between 2012 and 2013, grew by 2.1 percent in Illinois. It grew by 2.7 percent in Wisconsin, 2.5 percent in Michigan and 2.3 percent in Ohio and Indiana. However, one third of the income growth in Illinois was due to ``transfer payments,'' which include welfare, disability, food stamps, workers compensation and other programs. Wages and salaries in the state only increased by 1 percent.
  • An estimated 31,000 workers left the Illinois labor force in 2013. At the same time, Michigan's work force expanded by 2,000 and Indiana's grew by 11,000.

There are differences between states, but the evidence is overwhelming. Strategically lowering taxes has resulted in economic growth by our neighbors. The Illinois plan of more taxes has hampered the state's economic recovery and there's no reason to believe that continuing down that path will have a different outcome.

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