14.7.17

ENCOURAGING FURTHER TAX EVASION?

There's a compact between Illinois and Wisconsin under which Wisconsin residents who work in Illinois pay Wisconsin income tax.  Wisconsin cuts Illinois a check to make up the difference.  In the wake of the recent, this time apparently permanent, increase in the Illinois income tax rate, Wisconsin is on the hook for a bigger check.
Because of a tax reciprocity agreement enacted in 1973, Wisconsin residents who work in Illinois file their taxes in Wisconsin to avoid filing two tax returns. Under the agreement, whichever state has more revenue as a result must reimburse the other state.

The effect will be a $51 million loss to Wisconsin’s general fund in the next budget.
That's a first approximation: for instance when those Illinois workers fuel their car in Wisconsin, and shop at the Pleasant Prairie outlet mall rather than Gurnee Mills, and buy cheese in Wisconsin for consumption in Wisconsin, Illinois gets no cut of that tax.  (I'm being only partially facetious: there's a Use Tax entry on the Illinois income tax forms, and the instructions stipulate that if a flatlander buy cheese in Wisconsin for consumption in Illinois, there's a one percent food tax due.)

Reason's Eric Boehm correctly contemplates the follow-on consequences.
Wisconsin, however, could still come out ahead. A 32 percent income tax increase is sure to drive more residents out of Illinois. The Land of Lincoln lost more than 37,000 residents in 2016, the third consecutive year that Illinois lost more people than any other state.

And that was before a massive tax hike.

No wonder Gov. Scott Walker is rolling out the red carpet for the exiles.
When you figure in the Combine's efforts to tax businesses even more, for the privilege of doing business in Illinois, for instance, it can only get worse.  It is no accident, dear reader, that the Foxconn factory location team has been observed in Wisconsin and Michigan, but so far not in Illinois.

The workers follow the factories.
I’m writing this from a house in southeastern Wisconsin my wife and I bought recently. I figured we’d get ahead of the escape-from-Illinois crowd that’s increasingly feeding demand here. If Illinois doesn’t adopt the radical changes it needs by the time my youngest graduates from high school there, I’ll make this my permanent home — like so many Illinois ex-pats I’ve met here have done. In the meantime, we’ll buy our groceries here often, where they’re exempt from any sales tax.

Is it disloyal or selfish to avoid paying in Illinois?

On the contrary. Paying into an unreformed Illinois is what should be questioned. If you think some of the social service providers have been underfunded by the state, as I do, contribute to them yourself. Think the state universities are underfunded? Write a check. You can get money to any of those far more efficiently and selectively by doing it yourself and not through the tax collectors.

Personally, I’d be OK with higher taxes if they were needed after massive reform. Wisconsin isn’t exactly a low tax state, but it’s honest, delivers value and welcomes employers.
Illinois, however, is none of those. More here.

And the Green Bay Packers will soon be returning to training camp.

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