Editor's Note: This is the second story in a two-part series on the state of Illinois after a year of higher personal and corporate income taxes.
By Andrew Thomason and Anthony Brino, Illinois Statehouse News
Illinois Republican lawmakers and businesses blame the state' struggling economic recovery on income tax increases, but recent indicators suggest other factors at play, too. Since Illinois increased its corporate income tax by 46 percent from 4.8 percent to 7 percent this past year, several expected changes occurred but some unexpected ones happened, too.
For instance, the number of limited liability companies and corporations registered with the state actually increased, from 71,449 in fiscal 2010 to 73,130 in fiscal 2011, according to the Illinois Secretary of State. The number of non-farming jobs increased by 1 percent, from 5.6 million in 2010 to 5.7 million in 2011, according to the Illinois Department of Employment Security. But the state unemployment rate increased from 9 percent last January to 10 percent in November, the latest figure available.
“To get the unemployment rate down, you don’t just have to create new jobs, you have to create enough jobs to absorb the number of people coming into the job market,” said Fred Giertz, an economist with the Institute of Government and Public Affairs at University of Illinois at Urbana-Champaign. "When unemployed people give up looking for jobs, they are no longer counted in unemployment figures. As the economy slowly improves and those people once again start looking for work, they can inflate the unemployment rate," Giertz said.
As far as higher taxes are concerned, Giertz pointed to the state’s fiscal health. Raising income taxes would have been a huge blow to businesses, if the state’s finances were healthy and robust, but since the state was on the verge of financial collapse, raising taxes wasn’t the worst decision.
“To be honest, if you are really in a hard-hit industry, you’re probably operating at a loss and so you haven’t felt the impact,” said Todd Maisch, vice president of government relations for the Illinois Chamber of Commerce.
Giertz comes down between the claims of the business community that the state has lost a year of job creation and the Quinn administration’s claims that the income tax saved the state from certain doom. “Illinois was in a really bad situation a year ago, and it’s still in a really bad situation now,” Giertz said. “It’s been kind of a wash.”
You can read the full report on this story at: http://illinois.statehousenewsonline.com/7461/il-economy-struggles-from-mix-of-factors-some-surprising/