As predicted, 2017 Illinois income tax hike hurting the state, IPI reports
A Chicago-based conservative think-tank that predicted the dire consequences following the 2017 income tax increase out of Springfield says the expected outcome has come to pass.
Job growth in Illinois "has gone from the middle of the pack to back of the line" and is hurting the state's economy, the Illinois Policy Institute reported Nov. 2.
"After the Great Recession and before the 2017 tax hike, Illinois ranked 27th in the nation for average annual private sector jobs growth, at 1.4 percent," the IPI said in its report, citing research by the Bureau of Labor Statistics. "But in the year after the tax hike, Illinois' private sector jobs growth ranked 44th in the nation at 0.97 percent —a 30 percent decline."
In addition, the state's nongovernment jobs growth fell to less than half the rate in the of the rest of the US during the after the 2017 tax hike, "further widening the divide between Illinois and other states," the IPI report said.
The IPI report was written by Bryce Hill, a research analyst, and Chena Underhill, a marketing intern.
During the summer of 2017, Illinois lawmakers raised income taxes by 32 percent, the largest permanent income tax hike in the state's history. Personal income taxes went up from 3.75 percent to 4.95 percent, and the corporate income tax rate increased from 5.25 percent to 7 percent.
The IPI predicted almost immediately that the tax hike would hurt the state's already sluggish economy.
That prediction ran concurrent with characterizations about the hike by business representatives such as Vince Kolber, chairman and founder of the Chicago-based transport equipment leasing company RESIDCO, that the hike amounted to a 120 percent increase.
The the 2017 increases did nothing to reduce Illinois's standing as one of the worst states in the nation for taxes.
In its report this month, the IPI said it's still too early to empirically estimate the 2017 tax hike's impact, but the employment slowdown has been consistent with what experts predicted.
"Although tax hikes may initially cause tax revenues to increase, the negative economic effects of the 2017 tax hike will overshadow any benefits of additional revenue in the long run," the IPI report said. "Higher taxes discourage investment, which results in a decline in worker productivity. Slowing production results in decreased labor demand, wages and employment in the state. It also encourages the tax base to leave, leading to an overall weakening of the Illinois economy."