Ill. Tax Increases: The Beginning of an Exodus, or Just Another Annoyance?

A University of Illinois economist doesn't predict a long line of businesses leaving the state because of higher income taxes, but he said Illinois remains an uncertain place for commerce and industry.

Daniel Merriman of the Illinois Institute of government and Public Affairs said neighboring states had already begun to lure away employers concerned about Illinois' uncertain deficit situation even before lawmakers passed a 67 percent hike in personal income taxes this week. Governor Pat Quinn signed the increase into law Thursday afternoon.

Merriman said the tax increase will be one more drawback, but it still won't be enough to address all the red ink in Springfield.

"A combination of tax increases, expenditure reductions and growth is necessary to eliminate it," Merriman said. "The taxes actually do help reduce the deficit. It's just that it hasn't done enough to fully eliminate it, and they're still going to have to have expenditure reductions along the way."

Merriman said lawmakers still haven't addressed structural problems either, like fixing the underfunded pension system or revamping Medicaid and workers' compensation laws. But he said employers are not as mobile as some would believe - noting that most firms are rooted in the state and serve mainly Illinois customers.

Then there is the question of the region's overall economic health. Merriman said the pressure facing manufacturers in Illinois would face them wherever they relocate.

"A lot of the concern that people have had with the kind of business loss in Illinois has been with manufacturing establishments that have been leaving the entire Midwest, and to some extent they're just leaving the country as a whole," he said. "So it's not clear that Illinois is going to be losing that much to neighboring states. It's that manufacturing just isn't as strong as it used to be.