Monday, May 2, 2016

Sun-Times: Roeder’s Opinion on Rauner



Gov. Bruce Rauner has an unhealthy relationship with bad news. He really needs negativity. It’s a strange place for a politician to find himself, since they are usually addicted to taking credit for any scrap of good news.

Rauner, however, has to make people believe that as an economic player Illinois is last, weakest, worst and so on to rally support for a “turnaround agenda” that enriches companies and the super wealthy. For the sake of that agenda, he’s blocked any reasonable state budget, holding hostage contractors and state universities that rely on public money.



A good example of the Rauner spin occurred in mid-March, when the federal government released revised data on jobs and unemployment for all the states. The revision, based on fine-tuning of statistical methods, showed that Illinois gained 52,600 jobs last year, vs. a prior estimate of a loss of 3,000 jobs. Rauner’s Department of Employment Security buried that fact in a news release emphasizing that Illinois’ job growth was “anemic” and worse than the rates of other Midwestern states.

But Rauner can’t depend on pessimism much longer. Economic trends in Illinois, after showing strong improvement the last few years, are getting worse under his watch. His budget ploy can’t be helping, as it is causing a widening circle of layoffs. First it was social service agencies, then state universities and next up might be tourism because Illinois has no money for seeking visitors.
Dig into the federal numbers a little deeper, and you see that job growth in the state has slowed considerably since the latter half of 2015 and unemployment has risen — from 5.8 percent in August 2015 to 6.5 percent in March 2016, even as the national unemployment rate held steady or declined slightly.

Rauner would say that his agenda must be enacted to put Illinois on the right track and fix the economy. But the facts don’t support his claims. His case comes down to three assertions that have made for standard right-wing talking points, but none stand up to scrutiny.

1. The 2011 increase in income tax rates killed jobs.

The tax hike is not what hurt the state. Illinois’ jobless rate rose to 10 percent in August 2011, a few months after the tax hike was enacted, but then began a steady decline that picked up steam in 2013 and 2014. Job growth, and Illinois’ performance relative to its Midwestern neighbors, also improved during those years. All that has changed now that Rauner is playing budget brinksmanship, not exactly the “turnaround” he had in mind.

2. Illinois taxes are uncompetitive with other states.

Illinois’ overall tax rate is competitive. Consider the big-ticket items: individual and sales taxes. Except for the nine states that have no income tax, Illinois’ 3.75 percent flat rate is among the lowest. Even the old rate of 5 percent that stabilized state finances was relatively low. Unlike Illinois, most states have a progressive income tax that charges more for higher earners on a percentage basis.

Indiana, at a flat 3.3 percent, can claim a lower statewide rate, but watch out: Each county in Indiana collects an additional income tax that can amount to another percentage point or two. Illinois has no county income tax.

As for the sales tax, Illinois has so many exemptions that Rauner himself plus respected agencies such as the Civic Federation have suggested broadening it to include services from haircuts to legal fees.

The Illinois Economic Policy Institute examined total state tax loads on individuals and found that in Illinois, the rate in 2013 was slightly lower than in Indiana or Wisconsin.

3. A steady stream of people and businesses are moving out of Illinois.

Rauner conjures images of moving vans bound for neighboring states to create false urgency behind his non-budgetary agenda.

KDM Consulting examined tax data to conclude that any net loss of people from Illinois to Indiana and Wisconsin was explained by Illinois’ larger population. Its report also said that out-migration declined over the last 20 years.

In 2013, a nonprofit alliance called the Illinois Innovation Network examined Dun & Bradstreet data from 2012 and concluded the state had no large-scale loss of companies and workers to its neighbors. Some left, but they were replaced by an inflow from those states, an important point given the much larger economy in Illinois.

In other words, Rauner’s policy goals are based on false or misleading claims, and that’s more troubling than a governor who wallows in bad news.

David Roeder is a research fellow at Innovation Illinois, a nonpartisan organization dedicated to progressive public policies that advance equitable economic growth. He was a longtime business writer and columnist at the Chicago Sun-Times and served, when Pat Quinn was governor, in the Illinois Department of Commerce and Economic Opportunity.

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