Indiana Governor Mitch Daniels: Illinois Tax Hike Good News For Indiana Business

As Illinois lawmakers prepare to pass a massive state income tax hike, Indiana Governor Mitch Daniels says his state will welcome business owners who aren't too keen on the 67 to 75 percent tax hike.

"We already had an edge on Illinois in terms of the cost of doing business, and this is going to make it significantly wider," Daniels, a Republican, told the Herald-Review on Monday.

As soon as Tuesday, Illinois lawmakers are hoping to pass legislation that would boost the personal income tax rate temporarily by up to 75 percent, pushing the current rate of 3 percent as high as 5.25 percent. Monday night, lawmakers told WBEZ the increase would now be about 67 percent, since they could not find the support needed for the bigger increase.

In sheer percentage terms, the Illinois proposal could be the biggest tax increase on the long list of increases states have passed as they grappled with recent economic woes. Also, according to the The Tax Foundation, a nonpartisan tax research group in Washington, the hike would force Illinois businesses to pay the highest combined national-local corporate tax rate in the industrialized world.

"Folks in Illinois will eventually have to decide: Is this working well enough for us or do we want something different?" Daniels said to the Northwest Indiana Times. "Point one of our anti-recession strategy here is to avoid doing what they've now decided to do."

During last year's campaign season, Gov. Pat Quinn told voters he would work to pass a tax hike to combat the state's $13 billion deficit--but initially predicted the hike would be a lot smaller. At the time, Quinn said there would be a 33 percent increase, which he said would go toward education initiatives.

"I believe this 1 percent for education makes sense, and I think the people of Illinois will understand," Quinn told the Tribune in March of last year. "We must invest in the future, even in these tough economic times...This is urgent."

The increase could generate $7.5 billion a year, enough to balance the annual budget and begin chipping away at a backlog of unpaid bills. The state regularly falls months behind in writing checks to schools and universities, businesses that build roads or rent offices to the state, and organizations that provide a vast array of social services.

Indiana's Daniels said that Illinois residents "get what they vote for," and in this case it was a Quinn-backed tax increase. He also told the Northwest Indiana Times he felt sorry for the "suckers" who do business with the State of Illinois and are not paid in a timely fashion--if at all.

"It does show that you can make very different choices, and the contrast between the choice we've made and the one they have is stark," Daniels said.

Comments

[drbread]

04:00 PM on 01/14/2011

How can this guy crow when his state corporate tax rate is 8.5 % and personal income take rate is at 3.5.

And tax rates aren't the only thing a company considers when doing business in a state. There are infrastructure issues and how often have we heard about companies getting tremendous tax breaks to build facilities.

[BushBites]

05:05 PM on 01/13/2011

"The Tax Foundation" ?

Sounds like a Grover Norquist-type group.

Calling raging right-wing supplysiders "non-partisan" is like calling the tea party "independent."

[MovingtoNorway]

01:43 PM on 01/13/2011

People who live in Indiana are generally hillbillies

[BushBites]

05:02 PM on 01/13/2011

Well, hillbillies without the hills.

[Bobzmcishl]

11:52 PM on 01/12/2011

Only in the United States can we pit one area against another. There are times when we really act more like a confederation than a union. Daniels should have been complimenting this neighbor for taking the tough medicine to make their state well again. There are only four states that don't have problems similar to Illinois.

[army193]

10:15 PM on 01/12/2011

Indiana Gov. Mitch Daniels should be concerned about his own state. Oh wait he is prepping for a presidential run.

[scrappydoodle]

11:18 PM on 01/12/2011

HUH ? how does what he said above indicate anything but the fact that he is concerned about his state..?

[BushBites]

05:14 PM on 01/13/2011

Indiana pols love to conveniently forget Gary exists.

[songbookz]

07:09 PM on 01/12/2011

I live in Illinois and no one likes to pay taxes but we do like roads, bridges, schools, libraries, police, firemen, parks, and so forth. Certainly, I don't want to see tax-payer money wasted, but well-stewarded, tax money spent on education and infrastructure improvements will attract business over the long term.

[gregcurts]

08:55 AM on 01/13/2011

Agreed....however the key words are "well-stewarded" and that is where I begin to lose faith.

[songbookz]

11:27 AM on 01/13/2011

Why I used them. in the past, Illinois hasn't exactly been known for stewardship of the taxpayer's money. But, ever the optimist, higher taxes, used wisely, can have a positive effect on business.

[MrBluebird]

06:12 PM on 01/12/2011

Another former Hoosier here. I think Mitch a disciple of Grover Norquist/Ron Reagan and that his management of the state will lead to the same problems the country has now. There is no escaping the government's responsibilities... roads, education, care for the sick and elderly, etc. Ignoring these things are short term policies that will eventually reap the wild wind. There is one point that I have not heard directly addressed here. Much of what we called 'da region, Gary and surrounds has been devastated, and part of the reason is because Mayor Daley has isolated the region for his own ends. There is a modern airport that was sitting idle last time I was there, 2009. It has rail connections to Fort Wayne (Notre Dame) and to downtown Chicago. Daley obstructed this so an airport could be built SW of Chicago. Guess whose friends would profit by that.

[crookedcountyillinois]

06:57 PM on 01/12/2011

I really liked what you said about "escaping the government's responsibilities. But, unfortunately, Illinois's tax hike is an effort to pay for the pensions of legislators and government workers.

A much better solution is to simply ask those employees to contribute a small percentage toward their own retirements, rather than to tax everyone else to pay for the benefits that only a few will enjoy.

[jerzygurl]

08:04 PM on 01/12/2011

I'll bet that upon an investigative look at the pensions of some Illinois lawmakers and civil servants we'd find a Bell, CA scenario but on a much grander scale.

[BarryS]

05:54 PM on 01/12/2011

How much is the tax "increase" really? for most people it is less than $500/family. And, if you itemize federally 1/3 is paid for by the Feds. So, calm down. The hidden taxes in Indiana and the terrible state of its infrastructure probably costs most people much much more in the long run.

Here in Nevada, we have "low taxes." but registering a car costs $500-900 per year. And, you need new tires every year because the roads are barely paved. But the out-of-state companies like mining etc. get almost a free ride. They are laughing all the way to the bank. The casino companies pay a lower tax by at least 50% to the next lowest state. And yet we are told over and over they will leave Nevada. Duh. They already have and pay 2-3X as much taxes there.

No offense, but taxes are one of the least important costs for most businesses. And they and the politicians who are owned by them know it.

[RighteousNotRightWing]

08:25 PM on 01/12/2011

Nevada has no income state tax. A typical Illinois family has income of $40,000. 5% of that is $2,000.00. That is quite a bit of money for those families. We have potholes in Chicago believe you me. Oftentimes the whole rim has to be replaced, not just the tires. Also, we have huge heating bills to pay (which are not as high as in Nevada). Also, our property taxes as a percentage of the value of a property are probably the highest in the country. So, a comparison is not appropriate.

[Reality now]

05:24 PM on 01/12/2011

Before people get too excited about this tax increase they should take a look at what many of the southern states have for income tax rates. For a group that claims to be low tax the income tax rates are higher than many of the northern states.

[Hoosierbrad]

04:46 PM on 01/12/2011

Navistar just decided to move fifteen hundred (1500) people who averaged over $75,000 per year in salary from Ft. Wayne, Indiana to a place in Illinois just west of Chicago. Our "esteemed" governor doesn't know what he is talking about. We hoosiers are the suckers, we just elected a majority of Republicans into both houses of our legislature.

[Grannyover70]

04:32 PM on 01/12/2011

Before you get too hyped up on Governor Daniels and how great Indiana is, you should know this:
If you are retired, this a very important difference in Indiana and Illinois. As a retiree I paid
as much in Indiana state taxes as I did Federal; in Illinois I paid very little State taxes. Big, big
difference.

Illinois
• Illinois does not tax any retirement pensions. If you have a private pension, however, it must be a qualified retirement plan pension. Illinois personal retirement accounts, such as 401(k)s or Roth IRAs, are also exempt.



States That Won't Give You a Break

It's also important to know the states that tax the entire pension amount. These are:
• California
• Indiana
• Nebraska
• Rhode Island
• Vermont

[Nesquik1]

04:17 PM on 01/12/2011

Thank you Mitch Daniels for saving the state of Indiana. Democrats wrecked the state and in less than two terms you have cleaned it up.

[NOV42008]

08:18 PM on 01/12/2011

Does this mean people in Indiana will not be traveling to Illinois (Chicago) for jobs?

[Pennsanic]

04:02 PM on 01/12/2011

Indiana's very own state debt clock, ticking upward at a very brisk pace:

http://www.usdebtclock.org/state-debt-clocks/state-of-indiana-debt-clock.html

Might be helpful for the 'suckers' who think Governor Daniels' Indiana is all bubbles and sunshine. It's deep in debt as well. He just prefers a head-in-sand approach.

[WeWon]

03:56 PM on 01/12/2011

Right. For all the crazies who were screaming about what a 'traitor" Evan Bayh was look what we have now.

[smilingasa]

03:53 PM on 01/12/2011

Indiana is like New Jersey - Cut the budget to the bone and then can't even plow the streets AND have to ask the Federal Govt. for MONEY!