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Outmigration of wealthy is bad for Illinois

Trend could spell trouble for charities, government

Published: Friday, March 21, 2014 1:15 a.m. CDT
Caption
(Metro)
When people pack up moving boxes and leave Illinois, they don't just take their household belongings. Their money also leaves – a problem that bodes ill for Illinois, according to columnist Scott Reeder.

SPRINGFIELD – One of my favorite books is John Steinbeck’s “The Grapes of Wrath.”

In that epic tome, farmers from across Oklahoma load up all of their earthly goods onto Model T’s and flee the Dust Bowl for California in the midst of the Great Depression.

It’s easy to see that great exodus along Route 66 as the face of migration from one state to another.

And, to be sure, that is one face of relocation.

Poor folks still load up dilapidated cars with what they own and seek out opportunity.

I saw it all the time when I was reporter in Las Vegas – families showing up with not much but their dreams and hopes of landing a well-paying job.

But that isn’t the only face of migration.

When corporate executives or well-heeled retirees move, it is done with professional movers.

And you can often discern who the wealthiest of these households are by the amount of furniture and other belongings they have shipped.

The Wall Street Journal recently looked at data from Allied Van Lines concerning where wealthy households were moving to and from.

The report found that Illinois and Pennsylvania have more wealthy households leaving than arriving. And California leads the nation for the net number of wealthy households migrating away.

And states gaining the most? Florida and Texas.

So, what do East Coast, Midwest and West Coast states like Pennsylvania, Illinois and California have in common?

All three are high-tax states, said Joseph Henchman, a vice president at the Tax Foundation. On the other hand, Florida and Texas are much lower tax states.

“Illinois is particularly vulnerable to more out-migration because its neighbors – Wisconsin and Indiana – are busy lowering their taxes,” Henchman added.

On the other hand, the Illinois Legislature jacked up our income taxes by 67 percent back in 2011.

This has hurt folks from all economic groups.

And for folks who make their living making business decisions, it has created one more incentive to leave Illinois.

While it’s easy to shrug off the rich guy across town leaving, there is good reason for all of us to be concerned.

Have you ever worked for a business person poorer than yourself? Me neither.

Even those working in the public sector need to remember where taxes come from to pay for their jobs.

And yet, Illinois is consistently pursuing policies that push those job creators to more hospitable business climates.

And where those jobs go, poor and middle-class Illinoisans are sure to follow.

This migration translates into real money, according to Travis Brown, author of the book “How Money Walks,” a project that measures where people are moving based on tax returns.

“Illinois as a state lost $29.27 billion over the 18 years from 1992 to 2010,” Brown said.

During that period, only California and New York lost more income than Illinois, his study found.

“That’s a loss of $185,000 per hour. We forecast that between 2010 and 2014, Illinois lost somewhere between $5.4 billion and $7 billion in adjusted gross income due to migration,” Brown said.

Illinois is in that minority of states that continue to levy an estate tax.

And increasingly estate planners are advising retired, successful Illinoisans to consider moving to a state without an estate tax so assets can be passed more easily from one generation to the next.

That hurts all of us.

When successful retirees leave, they are no longer spending money in the Land of Lincoln, paying taxes here or donating to Illinois charities.

And that equates to fewer jobs for the rest of us.

And, ultimately, that is why all of us should be concerned.

Note to readers: Scott Reeder’s column is underwritten by the Illinois Policy Institute.

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