Indiana personal income has grown twice as fast as Illinois’ over recession era

Hoosier homeowners keep more of their wages as a result of a statewide property tax cap and income tax cuts.

Indiana’s statewide personal income has grown twice as fast as Illinois’ since the beginning of the Great Recession, indicating that Hoosier families are better able to find jobs and wage increases in their local economy. And not only that, Hoosier families are getting to keep more of their hard-earned dollars as taxes continue moving down in Indiana. Meanwhile, Illinois legislators continue to push for more tax increases that will lower the take-home pay for all workers despite many signs of the state’s economic weakness.

Hoosier homeowners are also keeping more of their wages as a result of a statewide property tax cap, and Indiana businesses and workers are seeing their income taxes cut as well. Illinois families, on the other hand, have seen their income taxes, property taxes, and sales taxes increase over the recession era, which eats away at the small personal income gains that have been made.

In addition, increases in personal income and decreases in taxes give Hoosier families more money for investment and consumer spending, two major drivers of economic growth.

Since the fourth quarter of 2007, Indiana’s personal income has grown at an annual rate of 1.8 percent, double Illinois’ annual growth rate of 0.9 percent. These findings come from a study by Pew Charitable Trusts of U.S. Bureau of Economic Analysis data. A state’s personal income is the combination of all income received by all residents in the state – including salaries, wages, bonuses, dividends and investment returns.

On a national scale, Illinois has the second-worst growth in personal income over the recession era, better than only Nevada. Illinois (0.9 percent) and Nevada (0.6 percent) are the only two states with personal income growth below 1 percent over the recession era, compared to a national average of 1.7 percent growth. This is a pathetic record for a state like Illinois, which has so many natural advantages as a transportation hub with a global city, and is caused by so many people leaving Illinois and such weak job creation.

Part of the reason why Indiana has much stronger personal income growth than Illinois is because Indiana imports so much income-earning power from Illinois. Indiana gained nearly 20,000 people from Illinois in 2015, the most recent year of U.S. Census Bureau migration data. This was the result of 34,000 Illinoisans moving to Indiana, while just 14,000 Hoosiers moved to Illinois.

Illinois families are seeing a brighter future just across the border, while Hoosier families are seeing better income gains, more jobs growth and lower taxes. This creates a tremendous challenge to Illinois lawmakers who are considering massive new tax increases on Illinois families, because the flow of Illinoisans into Indiana is already becoming a flood. More tax increases will make it worse.

The states that surround Illinois, namely Indiana and Wisconsin, have taken on their major spending drivers and are seeing lower taxes as a result. However, Illinois lawmakers have showed little willingness to reform public pensions that are worth millions of dollars for many workers but have racked up more than $130 billion in debt for taxpayers. Politicians have also been unwilling to reform the extraordinary bargaining powers given to government unions. And there is very little economic growth to fund Illinois’ out-of-control spending, which is why lawmakers keep coming back to taxpayers with higher and higher tax rates.

Illinois still might have a window of opportunity to reform its spending drivers. But without such reforms, Illinois lawmakers are condemning their constituents to a much bleaker future.