Neighboring states gleeful over Ill. tax increase ( I wonder who will read this? :)

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When I read this, I thought of...
Ballsvalve and Ian

SPRINGFIELD, Ill. – While many states consider boosting their economies with tax cuts, Illinois officials are betting on the opposite tactic: dramatically raising taxes to resolve a budget crisis that threatened to cripple state government.

Neighboring states gleefully plotted Wednesday to take advantage of what they consider a major economic blunder and lure business away from Illinois.

"It's like living next door to `The Simpsons' — you know, the dysfunctional family down the block," Indiana Gov. Mitch Daniels said in an interview on Chicago's WLS-AM.

But economic experts scoffed at images of highways packed with moving vans as businesses leave Illinois. Income taxes are just one piece of the puzzle when businesses decide where to locate or expand, they said, and states should be cooperating instead trying to poach jobs from one another.

"The idea of competing on state tax rates is . . . hopelessly out of date," said Ed Morrison, economic policy advisor at the Purdue Center for Regional Development. "It demonstrates that political leadership is really out of step with what the global competitive realities are."

By going where no other state dares to tread, Illinois could prove itself to be a policy pacesetter or the opposite — a place so dysfunctional that officials created a jaw-dropping budget crisis and then tried to fix it by knee-capping the economy.

Illinois faced a budget deficit of $15 billion in the coming year, equivalent to more than half the state's general fund. Officials warned that state government might not be able to pay its employees. It certainly would fall further behind in paying the businesses, charities and schools that provide services on the state's behalf.

To avoid that, the Democrat-controlled General Assembly voted to temporarily raise personal income taxes 66 percent, from 3 percent to 5 percent. Corporate rates will rise, too — from 4.8 percent to 7 percent — when Democratic Gov. Pat Quinn signs the measure.

The increase is expected to produce $6.8 billion a year for the four years it's in full effect. That should be enough to balance Illinois' annual budget and begin chipping away at a backlog of roughly $8 billion in old bills.

The tax move inspired a day of taunts across state borders and finger-pointing between parties.

"Years ago Wisconsin had a tourism advertising campaign targeted to Illinois with the motto, `Escape to Wisconsin,'" Wisconsin Gov. Scott Walker said in a statement. "Today we renew that call to Illinois businesses, `Escape to Wisconsin.' You are welcome here."

Illinois state Sen. Dan Duffy, a Republican, labeled the tax increase "the nuclear bomb of jobs bills."

There was even some carping from Illinois Democrats. Chicago Mayor Richard Daley predicted jobs will start trickling out of Illinois with little fanfare.

"Businesses don't have press conferences like this and announce they're moving 50 people out, 60 people out, 70 people," Daley said at an event in Chicago.

But Illinois' governor rejected the idea that the increase would allow other states to lure jobs away. "Lots of luck to them, but that's not going to happen," Quinn said at a news conference Wednesday.

Businesses look at more than taxes when making financial decisions, Quinn said. They also look at whether state government is stable and able to provide good roads and schools.

"It's important for their state government not to be a fiscal basket case," Quinn said.

A Wisconsin company seemed to prove his point.

Train-maker Talgo Inc. is threatening to leave Milwaukee because Wisconsin rejected federal funds for high-speed rail. Talgo still considers Illinois a strong possibility for its new the company's new home, despite the tax increase, said spokeswoman Nora Friend.

The tax increase "would not weigh in as a positive, but it's difficult to say whether it's the deciding factor," Friend said. "It would be one more factor that gets weighed in."

Illinois Democrats note that even after the increase takes effect, the 5 percent personal income tax rate will still be lower than many nearby states'.

The top personal rate in Wisconsin is 7.75 percent, for example, and Iowa's is 8.98 percent. Indiana and Michigan will have lower rates, however — 3.4 percent and 4.35 percent.

Bill Ecton, 54, owns Ecton's True Value Hardware in Robinson, Ill., just a few miles from the Indiana border. He was resigned to the fact that Illinois ultimately would raise taxes to repair the budget, but he said the taxes will take a toll.

"If I have to pay more to the state, it's money that I can't pay out in wages," Ecton said. "I'm not saying I'm laying people off, but maybe I'm going to look twice at adding another one."

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Associated Press writers David Mercer in Champaign, Ill., Scott Bauer in Madison, Wis., Dinesh Ramde in Milwaukee and Charles Wilson in Indianapolis, Ind., contributed to this report.

[Ian Gills]

It's the right thing to do. Why are Americans so opposed to paying taxes? Why are they so GREEDY?

The thing YOU forget is that when you pay taxes, you get SERVICES in return. So perhaps firms and people will be happy to pay higher taxes than move next door because there has higher crime, no fire service and no trash collection.

Man up America and pay your dues!

Am I the only one that's putting his hand in his pocket for this country? And I am a Johnny Foreigner.

Where is your pride? Where is your dignity?

Besides, it's the rich who would bear most of the burden, less so the rest of us. What's the problem with that? Nobody on this site (except the guy that owns his own baseball team) is "rich".

Everyone makes excuses about why they should not pay higher taxes. It's natural. But don't fall for their BS. They are blufffing. No one will be moving. And no one will be losing their job because some rich firm owner has to pay an extra cent on the dollar in tax. Give me a break....suckers.

[Cookie]

It might be the rich that bears most of the burden, but it is the middle & lower income that feels most of the blows.

[ballvalve]

My Parents made a weekly trip to Illinois from Wisconsin to buy margarine which was banned or overtaxed in Wi.

And of course chicago bought lake Geneva [mostly bank owned now]

And the Chicago businesses moved to Kenosha and points north. Now they will do more of it. Except Wi. has terrible property taxes, which is why everybody ends up in Kentucky and Alabama.