Badger InstituteBadger Institute
  • Home
  • Issues
    • Taxes
    • Education
    • Crime & Justice
    • Spending & Accountability
    • Economy & Infrastructure
    • Federalism
    • Licensing
    • Healthcare
    • Civil Society
  • Mandate for Madison
  • Research
  • Magazines
    • Diggings
    • Wisconsin Interest
  • Events
  • Media
    • Podcast
    • Fact Sheets
    • Viewpoints
    • Press Releases
    • Badger in the News
    • Video
    • Audio
    • Testimony
  • About
    • Our Mission
    • Board of Directors
    • Team
    • Visiting Fellows
    • America’s Future
    • Careers
  • Newsletter
  • Donate
  • Contact Us

Subscribe for Updates

Get the latest news and updates from Badger Institute.

What's New

Why should food stamps be forever stamps?

March 30, 2023

Latest crime figures show a Milwaukee in trouble

March 23, 2023

Wisconsin lawmakers in the dark on broadband

March 16, 2023
Facebook Twitter YouTube LinkedIn Instagram
TRENDING:
  • Why should food stamps be forever stamps?
  • Latest crime figures show a Milwaukee in trouble
  • Wisconsin lawmakers in the dark on broadband
  • The underfunded part of Wisconsin public schooling
  • Foreseeing the Future of Wisconsin’s Flat Tax
  • Wisconsin voters will be asked about welfare work requirements
  • A state without convictions
  • Why Wisconsin Needs a Flat Tax and Education Reform
  • Donate
  • Newsletter
  • Contact
Facebook Twitter YouTube LinkedIn Instagram
Badger InstituteBadger Institute
SUPPORT OUR MISSION
  • Issues
    • Taxes
    • Education
    • Crime & Justice
    • Spending & Accountability
    • Economy & Infrastructure
    • Federalism
    • Licensing
    • Healthcare
    • Civil Society
  • Mandate for Madison
  • Research
  • Magazines
    • Diggings
    • Wisconsin Interest
  • Events
  • Media
    • Podcast
    • Fact Sheets
    • Viewpoints
    • Press Releases
    • Badger in the News
    • Video
    • Audio
    • Testimony
  • About
    • Our Mission
    • Board of Directors
    • Team
    • Visiting Fellows
    • America’s Future
    • Careers
Facebook Twitter YouTube LinkedIn
DONATE
Badger InstituteBadger Institute
Home » Taxes » What Wisconsin can learn from Illinois’ fiscal predicament
Federalism

What Wisconsin can learn from Illinois’ fiscal predicament

By Jay MillerJanuary 7, 2015
Share
Facebook Twitter LinkedIn Pinterest

One of the benefits of having 50 states, our so-called laboratories of democracy, is that we can examine different states’ policies and learn from them. The lessons learned might be particularly instructive with respect to states in the same region. In that regard, Wisconsin is fortunate to be situated next to Illinois.

Illinois has the lowest credit rating among the 50 states and a fiscal outlook described as the nation’s “most dire.” Topping the list of problems fiscally for Illinois is a grossly underfunded government pension system. Although last year the then-Democratic governor, Pat Quinn, and Democratic legislature, passed tepid pension reform legislation, a court struck it down as unconstitutional.

To aggravate the situation, Illinois now has let expire a four-year tax hike. Starting in 2015, its flat individual income tax rate falls from 5% to 3.75%, a 25% drop. Revenue forecasters predict that this drop alone will cause Illinois to lose billions in revenue, at a time arguably when it can least afford it.

Whereas Wisconsin faces a budget deficit of about $824 million, Illinois’ deficit is projected to exceed $12 billion for fiscal year 2016.

Does that mean Wisconsin is poised to exploit Illinois’ misfortunes by luring its businesses to set up shop across the border? Don’t count on it.

Despite Gov. Scott Walker’s reputation for being a tax-cutting maven, Wisconsin’s top income tax rate sits at 7.65%, more than double the Illinois rate. A  nearly 4% differential in the two states’ rates is huge and might even sway businesses in Wisconsin to move to Illinois, rather than the other way around. That, in turn, could lead to more money in Illinois’ state coffers than otherwise predicted.

True, Illinois has a higher sales tax (much higher in Chicago, where it’s 9.25%) than does Wisconsin. But both states have high property taxes, and the hundreds more that consumers may pay in Illinois sales taxes annually does not offset the thousands more in income taxes that individuals face in Wisconsin.

Of course, given the size of its deficit problem, Illinois could be forced to take measures that will be politically unpalatable to all concerned. At this point, its newly elected Republican governor, Bruce Rauner, has not tipped his hand on how he plans to proceed.

Wisconsin should not assume, however, that it will gain from Illinois’ predicament, unless it takes steps to improve its own income tax competitiveness. To date, Walker, like Rauner, has been reticent about his plans for the upcoming legislative session.  Indeed, there has only been discussion, in public at least, about increasing the gas tax to cover the cost of road building.

To review the bidding, here’s where we are today. As one might expect, Wisconsin’s fiscal house is in much better order than Illinois’. Yet, the income tax disparity between the two states, one whose government is mostly blue and the other mostly red, creates a picture that is the opposite of what one would expect, given the respective philosophies of the two parties.

Wisconsin would be well-advised to be proactive in the matter of taxes, because one thing we know for sure: Illinois already has dropped its rate 25%. Moreover, as the Democratic Illinois Senate President John Cullerton noted, even at a 5% income tax rate, Illinois is competitive with Wisconsin. Our state leaders need to be mindful of that, rather than simply stand pat.

Jay Miller of Whitefish Bay is a tax attorney and an adjunct professor at the University of Wisconsin-Milwaukee’s Lubar School of Business. This column expresses his personal opinion.

News
Share. Facebook Twitter Pinterest LinkedIn Tumblr Telegram Email
Jay Miller

Related Posts

Why should food stamps be forever stamps?

March 30, 2023

Latest crime figures show a Milwaukee in trouble

March 23, 2023

Wisconsin lawmakers in the dark on broadband

March 16, 2023
Categories
Top Posts

Local pols filling old budget holes with massive COVID aid

December 8, 20221,455

This is not four years ago

November 10, 20221,288

A state without convictions

January 12, 2023647

Billions in federal spending in Wisconsin unaudited; results never measured

November 9, 2022493
Archives

Sign Up for Top Picks

Our weekly e-Newsletter with the latest items and updates

Connect with Badger Institute
  • Facebook
  • Twitter
  • YouTube
  • LinkedIn
About Us
About Us

The Badger Institute is a nonpartisan, not-for-profit institute established in 1987 working to engage and energize Wisconsinites and others in discussions and timely action on key public policy issues critical to the state’s future, growth and prosperity.

Facebook Twitter Instagram YouTube LinkedIn

Sign Up for Top Picks

Our weekly e-Newsletter with the latest items and updates

What’s New

Why should food stamps be forever stamps?

March 30, 2023

Latest crime figures show a Milwaukee in trouble

March 23, 2023

Wisconsin lawmakers in the dark on broadband

March 16, 2023

The underfunded part of Wisconsin public schooling

March 16, 2023
© 2023 Badger Institute | Privacy Policy | Disclaimer | Sitemap

Type above and press Enter to search. Press Esc to cancel.

This site uses functional cookies and external scripts to improve your experience.

Privacy settings

Privacy Settings

This site uses functional cookies and external scripts to improve your experience. Which cookies and scripts are used and how they impact your visit is specified on the left. You may change your settings at any time. Your choices will not impact your visit.

NOTE: These settings will only apply to the browser and device you are currently using.

CRM Software

Customer Relationship Management Software

Google Analytics

Google Analytics is a web analytics service offered by Google that tracks and reports website traffic. Google uses the data collected to track and monitor the use of our Service. This data is shared with other Google services. Google may use the collected data to contextualize and personalize the ads of its own advertising network.

You can opt-out of having made your activity on the Service available to Google Analytics by installing the Google Analytics opt-out browser add-on. The add-on prevents the Google Analytics JavaScript (ga.js, analytics.js, and dc.js) from sharing information with Google Analytics about visits activity.

For more information on the privacy practices of Google, please visit the Google Privacy & Terms web page: https://policies.google.com/privacy?hl=en

Powered by Cookie Information