Guest view: Cut our taxes and save our jobs

May 17, 2014 

The economic price of the 2011 tax increase was steep, and it put the brakes on the state's jobs recovery.

According to data from the Bureau of Labor Statistics, Illinois' monthly job creation dramatically slowed since the 2011 tax increase. Meanwhile, the rest of the country has accelerated its recovery and jobs growth.

The Great Recession of 2008 hit Illinois hard. One in 12 private-sector jobs in the state was wiped out -- 400,000 jobs were lost in total. Middle-class families and new college graduates were put on the defensive.

Finally, in January 2010, Illinois began to go back to work.

The Land of Lincoln bounced back better than most states. Illinois ranked fifth in the Midwest for private-sector job creation and 14th in the nation. Employers were able to create 6,500 jobs per month the year before the recovery.

But just when the state was starting to get back to work, Illinois lawmakers passed the largest income tax increase in state history.

The January 2011 tax increase raised income taxes by 67 percent for families and small businesses. Corporate taxes were increased by 46 percent. Illinois families were left with one less week of take-home pay -- businesses lost a week's worth of income.

The tax increase left fewer dollars for the productive private sector to spend and invest. So Illinoisans spent less, invested less and hired less.

But that wasn't all. The 2011 tax increase showed how politicians planned on paying for the state's drastic pension problems: with tax dollars. Businesses and residents saw that the nation's worst pension crisis would be paid for by Illinois' private sector.

Yet pension liabilities continued to grow. And job creation contracted.

For the 38 months since the tax increase, Illinois created only 4,700 private-sector jobs per month. Since 2011, the rest of the Midwest and the U.S. as a whole created jobs at a faster annual pace than Illinois.

That puts Illinois dead last in the Midwest and 39th nationally for private-sector job creation since January 2011.

There would be another 70,000 private-sector jobs statewide if Illinois had simply maintained its job recovery rate from before the tax increase. If we had accelerated at the same rate as the rest of the U.S., there would be another 165,000 jobs in Illinois today.

Many of those additional jobs were created -- just not in Illinois. A forward-looking businessman knew the tax man would be back for more in the future. That's why so many businesses packed their bags and moved to a different state. Many more planned their expansions elsewhere.

Dozens of large employers, including OfficeMax, Modern Drop Forge, Cosi and AM Manufacturing have left since 2011. On net, Illinois loses one person to other states every 10 minutes.

State lawmakers should not ignore the effects of the 2011 tax increase. Illinois' unemployment rate now stands as the highest in the region.

The Illinois General Assembly has another opportunity to signal to families and businesses how they plan to address long-term spending and pension problems.

The state's tax increase is legally set to expire at the end of 2014. Political leaders promised the tax increase would be temporary; the fact that politicians are considering making it permanent puts the state's credibility on the line with job creators and investors.

Illinois lawmakers shouldn't make the same mistake again. We can't afford it.

Michael Lucci is the director of jobs and growth policy at the Illinois Policy Institute.

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