Illinois: Abandon Ship?

The IRS updated its migration data for adjusted gross income (AGI), bringing to light further indications of the precarious condition of Illinois. After New York and California, Illinois is the state with the third-highest outflow of AGI, demonstrating its continuing ability to scare off wealth. Some might point out that the total amount of outflow decreased from 2018 to 2019 for Illinois, but this is deceptive. A closer look at outflow of AGI per taxpayer shows that Illinois is even worse than the year before, increasing from $133 to $138, which is the highest in the nation. Could the higher per taxpayer amount be the result of fewer taxpayers because so many Illinoisans have already jumped ship?

How might Illinois be causing such unfortunate circumstances? Here’s a look at the state’s Taxpayer Burden compared to the rest of the nation: In the last decade Illinois’ Taxpayer Burden has increased from $29,100 to $52,000, which in 2019 was over seven times the 50 state average. Seven!

What does the Taxpayer Burden mean exactly? The Taxpayer Burden is the amount each taxpayer would have to contribute to pay off all of the government’s liabilities today. What a shocker that citizens and businesses are taking their hard-earned dollars elsewhere, particularly when the state is trending towards an even larger Taxpayer Burden. One reason for this trend presents itself when looking at the public welfare expenditures for Illinois and the 50 state average:

Welfare expenditures in Illinois were double those of the 50 state average. Citizens who are bringing in income might prefer it if their taxes are being spent on resolving issues relevant to their own lives. Or, they might just prefer spending that money themselves. To increase welfare spending, politicians require increasing amounts of money. They have two choices here: raise taxes or raise borrowing. Higher taxes will only lead to fewer citizens; increasing public welfare expenditures is only a sign of progress if there are people around to pay for them. Illinois needs the income from its citizens and businesses more than they need Illinois. Something to consider with future policy decisions.

Even when politicians decide to borrow money over raising taxes in the present, borrowing more money will eventually lead to more taxes. Looking at the interest on debt per capita for Illinois, one can see how large state debt can result in higher expenses, which also affect the bottom line.

From 2017 to 2018, Illinois’ interest on debt per capita spiked from $273 to $345 per person. While this may not seem like a large number in the scheme of things, this data is concerning for two primary reasons: Firstly, Illinoisans have to pay over twice as much to cover the increasing interest expenses on money borrowed to pay for other expenses. Secondly, this data indicates that Illinois has an egregiously unbalanced financial situation despite claims of a balanced budget!

If Illinois continues to spend in such a sloppy manner, it will incur more debt, which will require more interest expense in turn, and vice versa. This cycle continues over and over; for concerned citizens, the uptick in interest expense is the tip of an enormous iceberg. Unless Illinois turns things around by truly balancing the budget, the ship will eventually crash. The passengers will continue jumping into lifeboats and head for other, nicer cruises.

Joshua Terry is a data research intern at Truth in Accounting.