SPRINGFIELD, Ill. – While many states consider boosting their economies with tax cuts, Illinois officials are betting on the opposite tactic: dramatically raising taxes to resolve a budget crisis that threatened to cripple state government.
Neighboring states gleefully plotted Wednesday to take advantage of what they consider a major economic blunder and lure business away from Illinois.
“It’s like living next door to `The Simpsons’ — you know, the dysfunctional family down the block,” Indiana Gov. Mitch Daniels said in an interview on Chicago’s WLS-AM.
But economic experts scoffed at images of highways packed with moving vans as businesses leave Illinois. Income taxes are just one piece of the puzzle when businesses decide where to locate or expand, they said, and states should be cooperating instead trying to poach jobs from one another.
“The idea of competing on state tax rates is . . . hopelessly out of date,” said Ed Morrison, economic policy advisor at the Purdue Center for Regional Development. “It demonstrates that political leadership is really out of step with what the global competitive realities are.”
By going where no other state dares to tread, Illinois could prove itself to be a policy pacesetter or the opposite — a place so dysfunctional that officials created a jaw-dropping budget crisis and then tried to fix it by knee-capping the economy.
Illinois faced a budget deficit of $15 billion in the coming year, equivalent to more than half the state’s general fund. Officials warned that state government might not be able to pay its employees. It certainly would fall further behind in paying the businesses, charities and schools that provide services on the state’s behalf.