Republican governors from near (Wisconsin, Indiana) and far (Texas, New Jersey) have given the media their two cents about Illinois' new revenue package. The collective take? It will be good for businesses ... in cities outside of Illinois. Officials from those two neighboring states are already cold-calling local employers to see if they've thought about relocating. New Jersey Gov. Chris Christie says he will personally fly here to lobby companies in Illinois (perhaps in lieu of his next trip to Disney World).
Following the passage of an income tax hike last week, Illinois employers will pay the state a bit more each year to operate within our borders. (Under the new law, companies will face a 7 percent corporate income tax rate (up from 4.8 percent) along with a 2.5 percent "replacement" tax on income that is routed to local governments.) The effect such a change will have on jobs, however, is likely minimal. While the marginal firm might skip town or choose a different spot for its headquarters, factors like the local workforce, the consumer market, and infrastructure play a far greater role in determining where companies set up shop. Indeed, Michael Mazerov with the Center for Budget and Policy Priorities pointed out Friday that "all state and local taxes combined make up only 2-3 percent of corporate expenses, on average, and the corporate income tax represents less than 10 percent of that already small amount." That underlying math does not suggest that the new rates will lead to massive levels of employer out-migration.
It's also worth noting the positive economic impact a tax increase will have on private social service providers. Our deadbeat behavior has already cost jobs; late payments, a recent survey found, forced 49 percent of organizations to lay off staff, 53 percent to reduce service hours, and 41 percent to extend their waiting lists. Those are employment opportunities the tax deal will save.