Wisconsin and Illinois Battle for Business
Last September the CATO Institute released its Fiscal Policy Report Card on America’s Governors: 2010. According to CATO “It uses statistical data to grade the governors on their taxing and spending records – governors who have cut taxes and spending the most receive the highest grades, while those who have increased taxes and spending the most receive the lowest grades.” Seven governors were given an “F” for completely mishandling their state’s finances including Illinois’ Pat Quinn (D) and Wisconsin’s Jim Doyle (D).
In Wisconsin, Governor Jim Doyle had raised taxes and fees wherever he could including a massive increase on nursing home beds. When the state assembly attempted to pass a freeze on property taxes, Doyle promptly vetoed it. The Wisconsin-based MacIver Institute reports “In the last state budget, Doyle raised taxes $2 billion and allowed local property taxes to go up an additional $1.5 billion. The previous state budget raised taxes and fees $763 million, and the “fix” to that budget raised taxes again $1.2 billion.” Doyle initially took over the governorship with a $3.2 billion structural deficit. Despite all the tax increases and $2 billion in “stimulus money,” Wisconsin now faces a $3.3 billion structural deficit.
In Illinois, where Pat Quinn had replaced the impeached Rod Blagojevich, the story is similar. Quinn increased taxes in 2009 by $1.1 billion. He spoke of “shared sacrifice” and the need to cut spending but managed to give out 11.4% raises to much of his staff. Again, even though taxes were increased, the state has approximately $6 billion in unpaid bills and a $15 billion deficit.
So what do you do when your state is spiraling out of fiscal control, raising taxes, raising spending, and losing jobs?
Voters in Wisconsin responded to their crisis by electing Milwaukee County Executive Scott Walker (R) as Governor. He brings with him a record of 8 consecutive budget proposals without a property tax increase, a 10% reduction in Milwaukee County’s debt, and a history of shrinking the size of government. Walker ran on simple principles that he referred to as his “brown bag principles,” so-named because he takes his lunch to work every day to save money.
1. Don’t spend more than you have.
2. Smaller government is better government.
3. People create jobs, not government.
Voters in Illinois on the other hand responded by…. reelecting Pat Quinn. Quinn had lobbied unsuccessfully for more tax increases before the November 2010 election but finally got his way at 1:30AM on the last day of the lame duck session with the aid of politicians who would not be returning. (Sound familiar?) On Wednesday he signed the largest income tax increase in Illinois history, raising the personal rates by 66% and raising corporate income taxes by 46%.
Walker wasted no time with a press release courting Illinois businesses to move to Wisconsin.
“Wisconsin is open for business. In these challenging economic times while Illinois is raising taxes, we are lowering them. On my first day in office I called a special session of the legislature, not in order to raise taxes, but to open Wisconsin for business. Already the legislature is taking up bills to provide tax relief to small businesses, to create a job-friendly legal environment, to lessen the regulations that stifle growth and to expand tax credits for companies that relocate here and grow here. Years ago Wisconsin had a tourism advertising campaign targeted to Illinois with the motto, ‘Escape to Wisconsin.’ Today we renew that call to Illinois businesses, ‘Escape to Wisconsin.’ You are welcome here. Our talented workforce stands ready to help you grow and prosper.”
We now have a unique opportunity to observe two distinctly different methods for taming a state’s deficit and debt. Both Walker and Quinn have majorities in their state legislatures so they should have no problem implementing their respective visions. It doesn’t take a genius to figure out that businesses (and people for that matter) like to keep more of their own money and that they will gravitate towards a state that allows them to do just that.
The additional problem for Illinois however is stability and predictability. A business isn’t going to pick up and move its operations to a state that has a chance of becoming hostile again next election. Walker’s track record in Milwaukee County was very good despite having a very liberal county board, and he won election repeatedly in a heavy democrat county. This bodes well for businesses entering Wisconsin as he will likely be reelected if he walks the walk and the climate will remain business-friendly.
Quinn’s dilemma is that businesses know that a positive change in Illinois policy would likely be temporary. (Not that a positive change is even on the table) The only stability that Illinois can offer a business is a guarantee of perpetual crony capitalism, corruption, confiscation, and collectivism.
Keep an eye on these two neighboring states and witness for yourself which approach bears fruit.
I am favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible. – Milton Friedman