Are high taxes driving an exodus of high net worth people from Illinois?
Is everyone leaving Illinois? Not exactly. The Census Bureau estimated that Illinois had 12.74 million residents in July, 2018, down only 0.7% from the July 2010 decennial census total of 12.84 million. However, the Illinois Policy Institute, after examining 2014-2015 IRS data, thinks a problem does exist, at least among people of high net worth. (https://www.illinoispolicy.org/reports/irs-data-show-continuing-illinois-wealth-flight/) This data showed that the people leaving Illinois had average annual earnings $19,600 higher than the people who moved in. Total adjusted income growth for all people in Illinois dropped by $3.5 billion during tax years 2014-15, $14.5 billion total over tax years between 2011 and 2015. From this IRS data, $3.4 billion of the 2014-15 decrease resulted from migrations to other states, primarily Texas and Florida.
The state's real problem appears, however, to be attracting new residents. A Chicago Tribune article in September 2019 (https://www.chicagotribune.com/news/ct-census-illinois-population-trend-leavers-met-20190925-55e2uha64rardg7pa5734u6twu-story.html) noted that Illinois population as a whole started to decline in 2014. Census Bureau data said the net loss rate was about 6.5 people per 1,000 residents in 2018, up from 3 per 1,000 in 2013. We were number 49 of 50 states on this measure, with only Alaska having a higher rate of people leaving, 11 out of each 1,000 residents in 2018. Only 266,000 people reported moving to Illinois in 2017, 9% less than the 292,000 who moved in during 2013. Those moving out of Illinois to other states or U.S. territories totaled 339,435 in 2017, where only 195,092 moved in from U.S. states or territories. The rest of the 266,000 total immigrants to Illinois came from other countries. Of Illinoisans who left, 28% were in their 20s. More recent census data shows 114,000 more people moving out of Illinois in 2017-18 than moved in. (Data from Pew Trusts analysis, available at https://www.pewtrusts.org/en/research-and-analysis/blogs/stateline/2019/06/19/why-is-illinois-hemorrhaging-residents.)
Only 9 Illinois counties have increased populations in this decade, as opposed to 68 of the 102 during 1990-2000. The recent increases include people moving into DuPage, Kane, and Will counties, but not to the rest of the metropolitan area.
Past increases in income taxes have, somewhat unexpectedly, been associated with increases in high net worth tax filers in Illinois. (Crain's Chicago Business article, available online at https://www.chicagobusiness.com/government/heres-what-happened-after-illinois-income-tax-jumped-67.) In 2011 through 2014, the years during which the state income tax rate increased by 67%, from three to five percent of adjusted gross income, the number of federal tax filers with Illinois addresses reporting adjusted gross income between $100,000 and $200,000 grew by 16 percent, while the number reporting income in excess of $200,000 rose by 29 percent. The total number of filers only grew by about 1/10th of 1%. Those reporting income of more than $1 million per year 1n 2014 numbered 3,618, up 25% from those filing in 2011. The yearly adjusted gross income of the whole million plus annual income group increased by 37.5% between 2011 and 2014.
If the "fair tax" proposal passes, and income taxes increase, this may happen again - or not. State GDP went up from $658.411 billion in 2011 to $679.343 billion in 2014, (see https://www.deptofnumbers.com/gdp/illinois/) The increase (or decrease) in high net worth tax returns, then or after another state income tax increase, may result from an improvement (or decline) in general and state economic conditions, not from changes in tax burdens.
Where do you want to live? Here, or down in the states with very large bugs, heat waves, and hurricanes? Church, friends, family, job availability, and weather can all play a role in migration.
My immediate family has chosen to stay in Illinois since my ancestor John Dean Alexander moved here in 1818, and have no plans to move.
• Bill Price is an attorney and founder of GrowthLaw in Warrenville. Contact him at wprice@growthlaw.com