The Policy Shop: Illinois’ people problem is a money problem
This edition of The Policy Shop is by Bryce Hill, director of fiscal and economic research.
When you treat people like piggy banks, some of them will get fed up and move. It is most likely the folks with the most money will be the ones to go.
Illinois politicians seem to be ignoring those facts. Data from the Internal Revenue Service just proved they are facts – again.
In 2022, 86,693 individuals left Illinois for greener pastures, according to an IRS comparison of 2021 to 2022 tax returns. They took $9.9 billion in income with them.
Imagine all the government incentives and recruiting efforts it takes to get companies to come to Illinois or expand here until you reach $9.9 billion in new payroll. Yet Illinois let that amount slip from its grasp in a single year by mistreating its residents.
Plus, the higher the person’s income, the more likely they were to get out of Illinois. People earning over $100,000 annually represented over half of those who left, but the money they took with them was the great bulk of income lost: nearly $8.8 billion of the $9.9 billion that vanished.
Think about that the next time a politician spouts platitudes about “soaking the rich.” The rich will leave, if you consider someone making $100K to be “rich.” They will pay their taxes to Florida or Texas or some other state that welcomes them rather than treats them with disdain for working hard.
It’s not all about loss. Some people do move to Illinois. But they make $37,922 less than those who leave. So those who leave create a deficit in the economy that is aggravated because those who come are less able to contribute and are more likely to need state services. That’s losing on top of losing.
Comparing the incomes of those moving in to each state to the incomes of those moving out shows Illinois has the biggest gap between poorer newcomers and well-off movers.
Those who move into Illinois earn nearly $38,000 less than those who move away from the state, the worst discrepancy in the nation. Even if Illinois were able eliminate its population losses from people moving out, the state would still be experiencing wealth flight. Those moving out earn far more than those moving in.
States that attract higher-income residents can expect to see their economic potential rise, leading to greater improvements in living standards. Those whose economic profiles are declining because of migration (cough, cough… Illinois) run the risk of reduced economic growth and declining standards of living compared to other states.
Perhaps the most concerning stat was Illinois lost residents in every age and every income bracket. There was not a single demographic reported by the IRS from which Illinois gained residents. The state is failing Illinoisans across the board, which also means it is losing its prime workers and its future.
Tax filers between the ages of 26 and 54, along with their dependents, represent 64% of those who left the state in 2022, totaling 55,714 individuals. Illinois is also losing many residents as they approach and reach retirement age: 55- to 64-year-olds represent 18%, or 15,522, of those who left. Those age 65 and above were responsible for 13% of the decline, tallying 11,264 in lost residents. Those under 26 represented 5% of those leaving the state, or 4,193 individuals.
So where are Illinoisans going? Florida, Texas and Indiana. What do those three states have in common? Relatively low taxes: Texas ranked No. 6 in the nation for lowest state and local tax burden in 2022, Florida No. 11 and Indiana No. 14. Illinois was No. 44, meaning few states hit residents as hard, taking nearly 13% of their incomes, according to the Tax Foundation.
Illinois is losing residents to 40 other states. Florida got 19,099 Illinoisans, Texas got 12,259 and Indiana got 9,196 to cross the state line.
Illinois ranked third-worst in the U.S. by losing 87,311 residents to other states on net.
Two states topped Illinois for losses: California with 307,117 folks moving out and New York by losing 222,702.
Historically, high taxes have been the No. 1 reason Illinoisans considered moving away. Polling from NPR Illinois and the University of Illinois found 61% of Illinoisans thought about moving out of state in 2019, and the No. 1 reason was taxes. The Paul Simon Public Policy Institute found 47% of Illinoisans wanted to leave the state in 2016. It also found “taxes are the single biggest reason people want to leave,” with 27% citing that motive. The Lincoln Poll conducted for the Illinois Policy Institute in 2023 substantiated these sentiments.
With the new IRS data again proving Illinois’ population decline is driven exclusively by people moving away, political leaders in Texas, Florida and Indiana are hoping their peers in Illinois keep right on doing what they’ve been doing: spending and taxing and spending some more. Those other states’ leaders will be laughing – all the way to the bank.