Big government ruins Illinois

Terrence Wall, a well-known developer for Dane County and beyond, writes from a businessman’s perspective. Often, he writes about the intersection of politics and business for IB, and how pending mandates or legislation affect the bottom line. However, his topics vary.

There are still a lot of signs in Dane County deriding Gov. Scott Walker and the reforms implemented in Wisconsin last year. So I asked myself, what would Wisconsin be like if we continued down the path we were headed before the reforms were passed? Fortunately, we don’t have to guess because Illinois provides a template.

Illinois tripled its debt load, borrowed billions to fund an under-funded pension system – under-funded because politicians kept adding more promises – and last year the state passed a $2 billion tax increase.
As reported by the Illinois state treasurer, the state raised the income tax by 67% (yes, 67%) and increased the corporate tax by 30%, which not surprisingly resulted in a number of companies either moving out or considering a move. And guess what? The tax increase went to fund – yes, you guessed it – the padded pensions of state employees, not private-sector jobs.

On top of this, Illinois increased spending by $2 billion, and the tax increase didn’t go toward debt reduction. They simply doubled down on spending, and to the amazement of the Land of Lincoln’s politicians, Illinois’ unemployment rate went up again in October, right after these tax and spending increases kicked in.

Throw in four past governors in prison for corruption and a generally corrupt political system, and it’s no wonder that the rest of the state of Illinois is exploring ways to secede from Chicago, where most of their elected officials hail from. Given this track record, I guess you could say that seceding from the union(s) takes on a whole new meaning!

This coming year, Illinois will learn (again) the hard lesson that tax increases lead to reduced gross tax revenue as businesses and individuals either leave the state or work less because of the negative incentives that punish hard work, innovation, and profitability.

How many times do politicians in this country have to learn this lesson? In California, there’s a group pushing to raise the income tax to 13% to help pay for excessive spending. Talk about slamming the door on entrepreneurs and small businesses ….

Now let’s contrast that with Wisconsin. More jobs are being created; in fact, right here in Dane County, I can report that there are over 3,000 new jobs coming within the next 24 months, based on companies that have signed leases or planned expansions.

In CEO magazine’s survey of best states to do business in, Wisconsin jumped up 17 spots. Wow!
Likewise, a recent Wisconsin Manufacturers and Commerce statewide survey shows that 94% of chief executives in Wisconsin believe the state is headed in the right direction – 94%! That’s an unheard of percentage. Count on more good things to come with that level of executive confidence.

Now let’s look at the purported negatives to Wisconsin’s reforms. With all the brouhaha over possible downsides, guess what, WMC reports that the total property taxes for all 424 school districts declined 1%. (In total, property taxes rose just 0.3% statewide.)

A super majority of school district superintendents report that their finances are in better shape than ever due to the reforms, giving them the freedom to innovate and secure competitive bidding for things like health insurance.

Unfortunately, the recall elections do cast a cloud over the future, which creates uncertainty, and uncertainty causes executives and small business owners to hold back on investing, hiring, and expanding their businesses.
It’s unfortunate that the government employees who are pushing the recall don’t realize that creating a positive environment for job creation to occur creates economic growth, which in turn increases total tax revenue, which in turn helps them.

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