This is really not a new insight but an article in this week’s Crain’s about Illinois’ estate tax really got me to thinking about some of the reason’s to move out of Illinois and there are 4 of them that immediately come to mind: taxes, taxes, taxes, and taxes. Illinois politicians love taxes. Hence the Illinoyed campaign launched by Indiana.
In the case of Illinois’ estate tax it is relatively new, having been enacted on January 1 of this year. It taxes estates above $2 MM at rates that range from 6.4% – 16% and it applies to everyone that lives here or owns property here (not exactly sure how the tax is applied to out of state property owners). So not only does it discourage property ownership here but, as the Crain’s article points out, estate attorneys encourage their clients to set up residency in states like Florida or Texas.
Tax #2 is the income tax, which they just raised by 66%. They are now taking a whopping 5% of our income. Lovely.
Tax #3 is everyone’s favorite: property taxes. They are always going up and they serve to directly discourage property ownership.
Tax #4 is the new online retailer tax. So far they haven’t really collected much tax on this one. All they did was cause the online retailers to dump their Illinois affiliates, which then encouraged the affiliates to leave the state, moving to Indiana in some cases. If Illinois ever succeeds in collecting this tax it will just add to the already high cost of living here.
The government thinks they can establish tax policy in a vacuum and ignore the law of unintended consequences. But they don’t give people enough credit. If the government inflicts enough pain people will eventually relieve that pain by just moving away, leaving the bureaucrats scratching their heads trying to find someone else to take money from. And when people move away of course that leaves more homes for sale and fewer buyers for those homes – hence another contributing factor for lower home prices.
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People deal with the taxes near Chicago though because they get to live in a metropolitan area, and companies stay because of the shear number of built-in customers. Which do you think would leave first?
Applying it to out of state property owners is easy. The state just records a tax lien with the Recorder of Deeds, and your estate can’t sell the property until the lien is satisfied. No different than under the inheritance tax, where they directed banks to seal safe deposit boxes upon learning of a death, or “selling of delinquent real estate taxes.” Enforcement of taxes “in rem” is nothing new.
Strange, though, but the property tax bill I received was way down. It appears that the condo association’s lawyer got lucky this time (and will earn his contingency). I guess that just means someone else has to pay.
As for the rest, while a Fox News poll had Governor Numbskull’s approval rating way down, except for African-Americans, it will be another 3 years before we will be able to do anything about the other tax issues, but given the voters in this state, I wouldn’t even put money on that then.
Well, you have rumblings from the CME and CBOE, and the usual modus operandi of corporations is to engage in tax extortion by telling Gov. Numbnuts that they are moving unless they get a tax incentive. If they get it, they aren’t paying their share, and history has been that they have not met their promises about increasing employment.
Individuals may be less prone to move, but you have to explain the loss of population in Chicago in the last census, and apparently they were not moving within Illinois.
What’s not clear is if someone has a large estate, lives outside Illinois, but owns a $200K condo here with a $100K mortgage, what does the estate tax apply to?
There are a lot of disadvantages to living in this metropolitan area also: weather, traffic, high cost of living, and crumbling infrastructure to name a few. I think you will see businesses and individuals gradually leave – or not move here – over time if things don’t get better. As for customers…that’s why I’m here but large corporations can be anywhere since their customers are all over the country or the world.
Chicago has been losing residents for quite a while. This last census showed Chicago was one of the only major American city to lose population. This state is a textbook case for the failure of the so-called solutions offered by Democrats.
You would have to look up the law to find out how it defines property and the threshold, but clearly only to the Illinois property. Here’s the source.
Also, according to that official compilation, the tax itself is not that new, in that it was enacted in 1990, although it does reflect amendments effective 1/13/11.
Also, strangely enough, information about the Estate and Generation Skipping Transfer Tax is on the Attorney General’s site.
I’ve heard repeatedly from tax experts and politicians, including former New York Governor David Patterson, that people will modify their behavior, when taxes are increased or a new tax is created.
If a taxing body increases sales taxes, people will either shop elsewhere, buy goods less frequently, or buy lower-priced items.
If income taxes go up, people will move or forego opportunities to increase their income.
We’re now in a time when people don’t need to go to an office every day. People can work from home, or they are road warriors and may only be in an office one or two days a month. These are the people who can live anywhere, and they will move where income taxes are low.
Let’s see.
Point #1 – Estate tax on estates worth over $2MM. Awwwww. Pardon me if I don’t cry for you.
Point #2 – Try getting the salary that you are getting in the Chicago area in Elkhart, IN. Typically the more urban an area, the higher the salaries are. Gee, I wonder why?
Point #3 – Property taxes. So what’s your solution? The state isn’t funding the schools (the majority of your taxes). The LOCAL communities were the ones who kept voting in property tax increases for the schools. NOT Illinois.
Point #4 – Awww. So if I own a store here, I get to pay taxes. If Amazon sells the same item on line, they don’t. Why?
The scary part of this whole story is that our deceitful governor could be easily get re-elected tomorrow due to the massive African American pop. in the city that would vote for him. If someone promises you low taxes, higher taxes on everyone else and lots of govt. handouts then why wouldn’t you vote for him? That’s why this state is f*****!
I’d like to “thank” Gov. S**t-for-brains for deepening the Obama depression.
Good work in killing jobs in the state. Hey Quinn, how about resigning.
1) Estate taxes amount to a triple or quadruple tax: corporate tax, personal tax, federal estate tax, then state estate tax. How much blood do you want to squeeze from a turnip? Those turnips will just take up root elsewhere and that’s what attorneys are recommending.
2) Higher salaries = higher cost of doing business. So businesses will just move elsewhere.
3) There’s a disconnect between the people paying the taxes and the people using the schools. Also, if the people paying the taxes felt like the schools were doing a good job they might not feel so bad.
4) Because Amazon doesn’t use ANY of the services that the brick and mortar store are using that are provided by the state.
All in all, I would say that may be a Reason NOT to leave Chicago illinois! besides how Great of a city it is and that the Taxes that are taken from us actually go to things to improve our life………. I`ll stay thanks
http://www.kiplinger.com/tools/slideshows/slideshow_pop.html?nm=Taxfriendlycities
The data at that link is pretty old. That was before the state income tax went up to 5% and the sales tax went up and the property taxes went up and the estate taxes went up.
Also, a lot of people here would disagree that we get our money’s worth from all these taxes.
No reason to leave. After all, the state is corrupt and bankrupt, Chicago is bankrupt and corrupt and most of the suburbs are bankrupt. What’s not to like. The fact is that folks ARE leaving which will make the situation worse but it might take 10 years to see and feel it.
But it’s so much more than taxes. It’s the total contempt for business shown by the Soviet Socialist Republic of Illinois. As long as the current regime needs to be propped up by Big Labor, it will ever be thus. I’m sure everyone who can will escape to Wisconsin or Indiana, or preferably to a Right To Work state far from here.
Get ready, the income tax is going up to 10%. New York wannabes in Springfield.
Nice try with all those fancy “stats” and “data,” don’t you know taxes just “feel” higher, and really, that’s all that matters.
Hey, the people of illinois elected Blago not once but twice. Reason enough to skid addle.
The real reason to leave Illinois is that Obama and company will be back to continue destroying the state. Just think, Rezko might not be there ,but they will still have Axelrod, Plouffe, Jarrett and the Obamas.
Michelle can get back to her role in the CFR and Obama can capitalize on all of his “accomplishments.
Great blog to get people thinking more about this subject. I appreciate what taxes are supposed to do for our city. But, if you can’t afford to enjoy the city, what good is it living in it?
The Chicago MSA grew 4% from 2000 to 2010. The city proper lost population.
I used to like your column, Gary, but this is just beyond the pale. If you don’t like it here, move. If you like it here but want things changed, then talk about the changes you want. But to write headlines actively encouraging people to leave the state shows zero integrity in my opinion.
1) Estate taxes are one of the great leveling tools in a democracy, helping to address the creation of distinct, long-lasting classes. Wealthy families already enjoy large advantages, and taking a bite on death is a way to help keep taxes on the middle class lower, to foster new growth. It may not make sense to tax existing wealth of living persons, but there’s no moral or ethical reason the children of the rich should enjoy even more advantages without chipping in to help level the playing field.
2) Yes, Manhattan and San Francisco are just hemorrhaging jobs … oh, wait …
3) Everyone gets educated, and even if you go to a private school you benefit from the fact other people are educated. Since you said “Illinois” and not “Chicago,” Illinois schools in general are pretty good – suburban Chicago schools include some of the best public schools in the national. CPS has some issues, although not all those issues are within the purvey of the school to address. Nonetheless, schools do need to be paid for.
4) Sales taxes aren’t about the services the business uses. They’re about supporting the services the CUSTOMER uses. Are you really that bitter and dense you don’t know that? Plus, Amazon DOES use some Illinois services. If there’s fraud, do you think Seattle PD flies here and runs down the crook? Do you think Seattle pays for the roads that deliver those goods to the customer?
I love your real estate analysis, but this column here is the worst kind of ill-though trash and makes me think MUCH less of you. You’ve lost my respect.
Ouch! That hurts.
I’m not encouraging people to move but I’m pointing out that estate planning attorneys are doing just that as reported by Crain’s. My point is that at some point it’s the logical consequence of a high tax environment.
1) I have mixed feelings on the topic. I understand the intent. It certainly makes sense for immensely wealthy families but $2 MM doesn’t seem like that much. If I work hard all my life why shouldn’t I be able to pass a nice chunk along to them tax free?
2) The jobs will move. It’s only a matter of time. Personally I never understood why people live in Manhattan or San Francisco with their exorbitant cost of living.
3) Yeah, I was thinking about CPS when I lamented on the quality of the schools. I’m hopeful that things are turning the corner but the fact of the matter is that people with school age kids routinely flee the city for suburban schools. That’s harder than it used to be with all the city dwellers with no equity in their homes.
4) It’s not clear at all to what extent sales taxes are to provide services to consumers vs. businesses. My point is that Amazon does not use anywhere near the services of a brick and mortar retailer. But your example of paying for the roads is a good one. Amazon pays UPS and UPS pays for the roads so Amazon does pay for the roads already.
We could actually have a long discussion about sales taxes. Curiously, I’m actually in favor of higher sales taxes as a way to reduce income taxes. I would like to see taxes assessed on what people consume instead of what they produce – except for housing, health care, and food.
BTW, you can see from the retweets that I received and the “likes” that this was one of my more popular posts.