Earlier this month, I had the pleasure of serving on a panel with Congressman Bill Foster and Mayor Tom Weisner, among others, to raise awareness of Illinois being a “Payer State” within our country.
In a typical year, $20 billion leaves Illinois; we pay $1.36 in federal taxes for every dollar of federal spending returned to the state. In fact, according to figures compiled by the Pew Charitable Trust, Illinois receives the third smallest amount of federal spending per capita in the country.
While the entire country is governed by the same federal tax code, individual and corporate tax burdens vary substantially between states. Many states get much more back in federal spending than others. This transfer of wealth from the “Payer States” to the “Taker States” inevitably shows up as higher state taxes, higher government debt and underinvestment in education, infrastructure and health care in the “Payer States.”
While much has been said in recent years to malign Illinois employers, they have done their best through the economic downturn to support their employees, communities, state and even their country.
According to the Tax Foundation, Illinois businesses are among the most generous in the nation. Only businesses in four other states had a higher tax rate than Illinois’ 9.5 percent last year.
It’s no wonder business men and women from throughout the state are frustrated with the opportunities before them.
With respect to our neighbors, Wisconsin had the next closest corporate income tax rate at 7.9 percent. And yet for every dollar generated from taxes, Wisconsin saw a return of $1.68.
Indiana, at 7.5 percent, realized more than $2 in the exchange. Nearly every state around Illinois saw a positive return…but not Illinois.
According to WalletHub.com, Illinois was the second least dependent on federal return on taxpayer investment. During the 1990s and 2000s, Illinois contributed $2 trillion in Federal taxes. Unfortunately, during that same 20-year period, we received less than $1.3 trillion in Federal spending — a mere 65 percent of what was contributed.
How would look if there was more equity in the distribution of Federal spending? Illinois could focus investment in new technologies and equipment, stimulate the expansion of existing businesses, address stagnant wages and revitalize infrastructure and education services. With refocused investment, Illinois would be poised to attract new business ventures and top talent. These changes would reinforce Illinois’ role as a business leader and net contributor to our nation’s prosperity.
Congressman Foster recently introduced The Payer State Transparency Act of 2015. The Act would require the Office of Management and Budget, in conjunction with the Council of Economic Advisors and the Treasury Department, to produce annual assessments of net economic effect on individual states of all federal spending programs. A comparison of these figures against a model of state tax burdens developed by the Bureau of Economic Analysis would be reported.
We appreciate Congressman Foster’s commitment to the people of Illinois. We look forward to better transparency – and more discussion – when it comes to this topic.