Crain’s Propaganda on Illinois vs. Indiana

My comment on a brainless story:

Since when is Crain’s the new PR mouthpiece for Quinn and Rahm?

Except for the graphic this piece is nearly 100% opinion. So Indiana spent $300k on a campaign and got 20 or so companies to move. Those companies may provide several millions worth of tax base; yielding a huge ROI for IN. But the author just sweeps that under the rug.

Yes, IN does not have the “white collar” talent pool that Chicago has. But it will develop it over time. Success is a long term game; not a lottery ticket.

The Illinois Machine has driven us to the edge of insolvency. Rahm appears to have a plan. Quinn is a headless chicken. But sooner or later the taxpayers are going to get a tax bill the likes of which have never been scene before. Then we’ll see how many more people decide to move East and North.

via Crain’s Chicago Business.

Raise Taxes — Lose Revenue

The current taxes on a pack of cigarettes in Chicago include $2 from Cook County, 98 cents from Illinois and 68 cents from the city. If Quinn signs the latest increase, the taxes in Chicago will be $4.66 per pack, compared with 99 cents in East Chicago.

On Monday, a pack of Marlboros at a 7-Eleven on North Wells Street in downtown Chicago ran $9.69, before the state tax increase. At a 7-Eleven on Hohman Avenue in Hammond, the same smokes went for $6.20.  …

“The cigarette tax increase passed the Senate last week. Quinn has said the hike is necessary to generate about $350 million for the Medicaid program.  …

In 2006, the Cook County tax doubled to $2 per pack.  …

But even as taxes on cigarettes climbed, the revenue in Cook County dropped. In 2006, the county garnered more than $200 million in cigarette taxes. That number plummeted to $131 million in 2010, according to annual reports.

Let’s stop here for a second and think about that.  In 2006 the Cook County Government DOUBLED the cigarette tax in order to RAISE REVENUE.  What was the result?  Revenue fell by a third!!

Legislators and experts agree some drop-off can be expected as tax increases price people out of the market or alter smoker behavior. The percentage of U.S. adults who smoke declined from nearly 21 percent to 19.3 percent between 2005 and 2010, according to the Centers for Disease Control and Prevention.  …

So during roughly the same period smokers (albeit nationally) kicked the habit to the tune of 8%.  But Cook County revenue off by 34.5%.

Cook County Sheriff Tom Dart has said he thought most of the revenue dip was due to fraud.

Dart and County Board President Toni Preckwinkle joined forces in September to add more staff to the county’s Revenue Department to investigate fraud claims. Within three weeks, investigators seized more than $353,000 in unstamped cigarettes and imposed more than $400,000 in fines, Dart said.  …

Well Mr. Dart, if your own statement is true then you completely suck at your job.  Your missing $69 million and you find $400,000.  You’ve located 0.58% of the missing money.  Less that one percent.

So what’s really happening here?  We know that the double the tax, yet revenues off by a third, only 8% quit, and Tom Dart can’t find the missing money.  So where’s the money?

Larry DeBoer, professor of agricultural economics at Purdue University, noted that Indiana benefits as taxes spike in neighboring states.”There’s no doubt that commerce goes back and forth across the borders,” DeBoer said. “If Illinois increases its tax by $1, we’ll realize about $10 million more in cigarette tax revenue.”

via Chicago Tribune.

Aaaah.  There’s the money!

In Illinois we’re governed by complete morons.  The Laffer Curve is a real thing.  People will change their behavior to engage in tax avoidance.  In this case is primarily involves not buying cigarettes in the City and County but in the collar counties and in Indiana.

More to the point, wouldn’t you think that when you double the tax and see revenue falling and falling and falling that someone would have stood-up and said, “Maybe we should roll-back that tax before we lose any more money?”  But not in this county.

Stupid Quinn and his ilk are going to keep raising taxes until there’s no one left to tax.

Who’s Pro Business?

Recently published is a series of stories on where it’s easier/better to start and run a business.  Whether we like it or not, businesses employ people; people do not employ businesses.  Creating and maintaining a pro-business environment is not easy.  But sure Illinois generally, and Chicago specifically, are failing… or are they?

First, a national story out of Inc. magazine telling us that  it’s easier to start a business in Rwanda than in the U.S. |  Well that can’t be good.  Perhaps this is why Hillary Clinton recently toured a GM plant in Uzbekistan.  Yep, creating 6,600 jobs and giving away $160k in entrepreneurial awards in Uzbekistan is a sure sign that maybe the U.S. has it’s job creation priorities a little out of whack.  You hard earned tax dollars at work.
Then we have Crain’s Chicago Business which confidently pronounced that Illinois’ business climate outshines its neighbors.  The three main reasons are low effective tax rates, easy access to capital, and a more educated population.  After telling us how wonderful Illinois is — and after most people have stopped reading — we find out the bad news:

The costs to operate a business in Chicago are:

  • 25% higher than in Des Moines,
  • 20% higher than in Indianapolis, and
  • 15% higher than in St. Louis.

Then we get this:

Catalyst Exhibits Inc., a trade-show exhibit management company, moved last week to Pleasant Prairie, Wis., from Crystal Lake to save money. The company, which employs 92, had been considering Elgin but chose Wisconsin, which provided a $1.2-million low-interest loan and a $500,000 grant.

“It wasn’t completely incentives,” says CEO Tim Roberts, who estimates he’ll save 20% a month on building costs, not to mention savings on health insurance and workers compensation premiums.

Oh, cheaper to manufacture in Wisconsin, I see.  I wonder why?

Illinois has the third-highest workers compensation rates in the nation, at $3.05 per $100 in payroll, though recent reforms are expected to lower those costs by about 9%. Indiana has the lowest in the nation, at $1.16. For a manufacturer, it could mean an extra $900 per employee annually. Wisconsin is in the middle, at $2.21 per $100 of payroll.

Illinois also is more unionized than neighboring states, with 16.4% of its workforce organized, compared with 15.1% in Wisconsin, 13.8% in Iowa, 12.2% in Indiana and 11.1% in Missouri, according to the Bureau of Labor Statistics. Unionized employees tend to have higher wages and more rigid work rules, driving up labor costs, which are the largest expense for most companies.

The rest of the article is where things get really bad.

Business owners worry they’ll have to pay the price for decades of fiscal mismanagement by Illinois’ elected officials. A yawning state budget deficit led to this year’s income tax hike. Even more ominous is the $93.5- billion funding shortfall in state employee pension plans. Illinois’ pensions are only 51% funded, the worst in the nation. Wisconsin’s plans are fully funded, Missouri’s and Iowa’s are about 80% funded, and Indiana’s is at 67%.

Ya, that’s a problem.  But we’re going to fix that right?

Indiana Gov. Mitch Daniels and Wisconsin Gov. Scott Walker have moved to rein in pension costs, pushing unions out of government work. Illinois Gov. Pat Quinn, who depended on unions for political support, has been unwilling to go as far.

Oh, Illinois is just going to keep piling on the debt.  So how do we get out of this hole we’re digging?

Illinois “won’t have any choice but to raise taxes again, and they don’t seem to be willing to cut,” says Mr. Roberts, a Barrington village trustee. “As far as the next 10 years, the odds in Wisconsin are much better for us.”

But at least our elected officials and the government bureaucrats are working hard to keep businesses in Illinois right?

Neighboring states also are developing a reputation for being more business-friendly. “When I call the secretary of state or whatever agency in Indiana, I get a positive response,” says Mark Winzenread, chief financial officer of Indianapolis-based Walker Information Inc., which previously had an Illinois office. “I don’t get that in Illinois. It’s generally a frustrating experience.”

When the 180-person consulting firm moved its headquarters just a short distance a few years ago, the state provided $600,000 to extend a road two miles. “We had one or two meetings and got it done,” he says.

Mr. Farrell, the former ITW CEO, says Illinois will have to fix its attitude and its finances or risk losing business to other states.

“I love Chicago, I really do,” he says. “Do you think I can look another CEO in the eye and say this is a great place to bring a plant? No. Most of the large companies in the state are very nervous about where we are.”

Oh, ok.  So there you have it. Illinois is broke.  Has access to capital and lots of smart people.  But it’s a financial mess, heading off the cliff, and the politicians and bureaucrats are clueless of how to help business because they’re all beholden to union interests.

Of course, in May 500 CEOs considered a wide range of criteria and ranked Illinois 48 out of 50 of states for business.  That’s right, Illinois in only behind New York and California.  Well we have to see how our neighbors rank in order to see if the Crain’s story is even close.

  • Indiana  – 6th
  • Iowa  – 22nd
  • Wisconsin  – 24th, and
  • Illinois  – 48th.

Hummm.  It appears safe to say that the position taken by Crain’s is at odds with the position taken by 500 business CEOs.  Kinda makes me wonder who came up with the Crain’s position and if it was their own idea or if it was provided to them.

I believe that Illinois has all of the elements needed to be an awesome state for business.  We do have not only manufacturing talent but technical know-how and access to capital as claimed.  What we need to do is balance our budget, reduce our spending, have pension reform, and elect people who really want to help businesses in the state.  It can be done.  We just need different leadership.