Edit Module
Edit Module
Edit Module
Edit Module

Illinois Is Not Losing Its Highly Taxed Residents

The state’s population is shrinking — but it’s also getting wealthier.

Cairo, Illinois, which has seen its population drop from 15,000 at its peak in the 1920s to roughly 2,000 today   Photo: Seth Perlman/AP

Illinois lost more residents than any other state in the 2010s. The reason, according to the Illinois Policy InstituteWall Street Journal, and Chicago Tribune editorial board, is that it’s taxing them away.

“It’s not the weather pushing people out of this state … to other Midwestern states,” the Tribune wrote last month. “It is loss of opportunity, high taxes and frustration at fiscal mismanagement by government leaders that penalizes taxpayers.

“What does Indiana offer that Illinois doesn’t? Lower taxes, more stable home values, balanced state budgets and funded pension systems. Not better weather.”

In fact, Illinois’s shrinking population is more complicated.

According to World Population Review, Illinois ranks ninth in overall tax burden, at 9.67 percent of a resident’s income. That’s mainly due to high property taxes; we rank 32nd in income tax and 13th in sales tax.

Plenty of states that gained population in the last 10 years have more onerous tax burdens than Illinois, including Hawaii and Minnesota. It’s true that of the four states that lost population in the last decade, three are among the top 10 most-taxed: Illinois, Vermont, and Connecticut. But the state that lost the largest percentage of its residents is West Virginia, which ranks only 15th.

Meanwhile, the state with the lowest tax burden, Alaska, is the 48th most populous. It lost more of its residents in the past year than any state besides West Virginia.

“The kneejerk tax thing doesn’t work because you can find high-tax areas that are growing in the U.S. and you can find low-tax areas that are declining,” demographer Rob Paral told the Better Government Association. “I know that gets lost on people who want to blame taxes on everything.”

The tax argument gets sketchier when you look at who’s leaving Illinois. In a recent Bloomberg column titled “Goodbye, New York, California, and Hello… Where?,” Justin Fox observed that all three states were losing low-income residents faster than rich people, concluding “[i]t’s not all to Texas and it’s not all about taxes”:

Domestic migration statistics are frequently cited as evidence of the failures of blue-state governance, in particular the higher taxes imposed by states that are losing lots of residents. There’s something to that — income-tax-free Florida sure is attracting a lot of affluent people from Illinois and New York, and a recent study of high-income California taxpayers concluded that a 2012 income tax increase there did in fact drive some away. But California, Illinois and New York have all experienced bigger per capita personal income gains than the nation as a whole since the beginning of 2010, and all saw taxpayers with incomes below $50,000 overrepresented among the leavers from 2011 through 2018. These departures may indicate failures of governance as well, but it’s a different set of governance failures, presumably related more to housing costs, commutes and job opportunities than taxes per se.

Demographer Alden Loury agrees, telling this magazine last year that “[Chicago] is losing more of its lower-income folks and gaining more higher-income workers.” That trend is the consequence of a “demographic inversion,” in which a once–working class city attracts wealthy residents, while low-earning residents are forced into outlying neighborhoods and suburbs — or, on a larger scale, other states.

In fact, Illinois’s most notable demographic shift is not the loss of wealthy, highly taxed residents, but of its black middle class, which has been shrinking for decades due to neighborhood disinvestment, rising property values, and lack of economic opportunity.

A comparison of 2010 Census data with the 2013–2017 American Community Survey shows that Illinois’s white, Latino, and Asian populations all increased, while its black population declined from 1,866,414 to 1,833,501. According to the same data, Illinois saw a decline in households earning less than $100,000 a year, while those earning more than $200,000 increased by 50 percent. The state’s real per capita income is also on an upward trend, from $43,208 in 2010 to $53,727 in 2019.

Meanwhile, September data analysis by the Tribune found two things: that many black Illinoisans departed for nearby Indiana, and that Chicago alone is driving much of the state’s population loss (though the metro area continues to draw black residents away from the city).

It’s possible that high taxes were a burden on those residents who fled Illinois, but it’s not clear that lowering the tax rate would solve the problem, either. In fact, the structural issues facing low-income residents are ones that would most benefit from a government cash infusion. One thing’s for certain: Whoever has been leaving Illinois, it’s certainly not the state’s C suite.

Share

Edit Module

Advertisement

Edit Module
Submit your comment

Comments are moderated. We review them in an effort to remove foul language, commercial messages, abuse, and irrelevancies.

Edit Module