05-04-2011 Geo. Wills (Federalism)

George Wills

Illinois, comprehensively misgoverned and ravenous for revenue, has enacted what has come to be called an “Amazon tax.” It requires Amazon and other online retailers to collect the state’s sales tax. Amazon and many other retailers responded by severing their connections with their Illinois affiliates.

Federalism — which serves the ability of businesses to move to greener pastures — puts state and local politicians under pressure, but that is where they should be, lest they treat businesses as hostages that can be abused. According to the Tax Foundation, Illinois has not only the fourth-highest combined national-local corporate income tax in the nation but also in the industrialized world.

A study by the Illinois Policy Institute, a market-oriented think tank, concludes that between 1991 and 2009, Illinois lost more than 1.2 million residents — more than one every 10 minutes — to other states. Between 1995 and 2007, the total net income leaving Illinois was $23.5 billion. The five states receiving most refugees from Illinois were Florida, Indiana, Wisconsin, Arizona and Texas. Two are Illinois’ neighbors, three have warm weather, two — Florida and Texas — have no income tax. In January, a lame-duck session of Illinois’ legislature — including 18 Democrats who were defeated in November — raised the personal income tax 67 percent and the corporate tax almost 50 percent. This and the increase — from 3 percent to 5 percent — in the tax on small businesses make Illinois, as the Wall Street Journal says, “one of the most expensive places in the world to conduct business.”