We can only hope that Sunday goes as well for Illinois in the battle against Wisconsin as Wednesday did.
If the Chicago Bears best the Green Bay Packers on the gridiron the way Illinois Gov. Pat Quinn bested Wisconsin Gov. Scott Walker on this Commentary page, our team will be Super Bowl bound.
Walker’s op-ed, co-bylined by two of his top legislative allies, opportunistically argued that recent income and corporate tax increases in Illinois are “creating larger budget problems for the future” here, whereas Wisconsin is “heading in a pro-growth direction.”
“Looking at the big picture, it’s clear that Wisconsin is a better deal for business,” the trio wrote. “Wisconsin’s corporate tax rate is too high at 7.9 percent, but we will work to lower it by making the difficult decisions in our budget. Illinois’ corporate rate is 7 percent, but the state also charges a personal property replacement tax — on top of the corporate rate — of 2.5 percent. The two taxes combined make Illinois’ effective rate 9.5 percent for corporations.”
Quinn parried that, even with the hike, “Illinois’ personal and corporate tax rates are lower than Wisconsin’s and comparable to other nearby states. For years, we have collected revenues at rates far below those of our neighbors — one of the contributing factors to our current financial instability. Last week’s reforms actually bring us in line with our neighbors.”
Score. The fiscal year 2011 “State Business Tax Climate Index” from the nonpartisan Tax Foundation in Washington ranked Illinois 23rd best in the nation, Wisconsin 40th. If our new, higher taxes had been in place, we would have ranked 36th, according the Tax Foundation reported last week.
Further, Walker’s gloss on the comparative corporate taxes omitted a key element: Wisconsin businesses pay taxes on personal property — equipment and the like — that are assessed locally and vary by taxing district. Illinois businesses do not.
The governors didn’t get to see one another’s essays prior to publication, so they couldn’t address each other point for point. Quinn didn’t respond directly to Walker’s assertion that “Illinois also has a much higher sales tax rate, which reaches as high as 9.75 percent, more than 4 points higher than Wisconsin’s.”
But Walker overstated his advantage. What he didn’t mention is that his state’s sales taxes apply to 76 service categories while Illinois’ sales taxes apply to only 17 categories, according to the Federation of Tax Administrators.
And Walker avoided the issue of income taxes. Single people in Wisconsin pay a 6.5 percent income tax — 30 percent higher than Illinois’ new rate — on income over $20,130. For income over $221,660, the rate is 7.75 percent, 55 percent higher than the rate paid south of the cheddar curtain.
Those are just a few taxes.
A better way to compare states is to look the percentage of personal income paid in fees, taxes and other levies to all state and local government bodies.
In Wisconsin, that percentage was 16.7, the 22nd highest among the states, when the Federation of Tax Administrators crunched the 2008 data, the most recent available. In Illinois, that percentage was 14.7, just the 44th highest.
Yet despite Wisconsin’s higher taxes, its economy somehow outperformed ours. From 1997 through 2009 (all available years in the online database), U.S. Bureau of Economic Analysis statistics show that per-capita gross domestic product growth in Wisconsin rose an average of about 1.2 percent a year, compared with about 0.8 percent a year in Illinois.
“Frankly, our state’s unstable finances have stood in the way of business investment,” Quinn explained in his commentary. Therefore, “We are putting our financial house in order, which will only make Illinois a stronger competitor.”
The tax argument is more or less a tie. Had Illinois’ new, higher rates been in place in 2008, our overall state and local burden would have been 16.8 percent, roughly equal to Wisconsin, according to an estimate by Chicago’s Center for Tax and Budget Accountability.
So, to break the deadlock, we look at Quinn’s argument for Illinois’ “strategic location,” “unmatched transportation infrastructure” and significant role in global commerce, and we compare it to Walker’s “quality of life” argument — it’s so pleasant in Wisconsin that many Illinois residents spent weekends and holidays there — along with lots of promises about reforms to come.
Sorry, Wisconsin, but that final wobbler falls incomplete.
Look for your losing streak to continue on Sunday.
Continue the debate at chicagotribune.com/zorn.
