Lessons From Obama's Home State

Back in the 1980s, tourism officials in Illinois coined the phrase, "Illinois, you put me in a happy state," as the sales pitch to would-be visitors to the Land of Lincoln.  Three decades later, President Obama's home state is far from a happy state.  What's happening in Illinois is a reminder of how destructive tax policy and bloated government can be on a people.

The state of Illinois increased its corporate tax rate to 7.0% from 4.8% in January 2011.  That's a 45% increase in the overall corporate rate.  Since that time, a number of companies, including industrial juggernauts such as Caterpillar* have threatened to move their corporate headquarters out of state.  In fact, Caterpillar made it clear to Illinois officials that it chose to build its newest manufacturing plant outside of Illinois due to the "business climate and overall fiscal health" of the state.  That plant would have added about 1,000 jobs to the state.

Other smaller businesses have followed suit and actually moved their corporate headquarters from Illinois to neighboring states.  Modern Drop Forge Co., which manufactures precision tools and has about 250 employees, along with Internet company, FatWallet.com, an employer of more than 50 workers, are among those businesses that have pulled up stakes and left since the corporate tax increase.

The exodus of companies and reluctance to expand in Illinois provide a great lesson to Obama and his cohorts who wish to increase taxes or limit tax deductions, which are essentially equivalent, on American companies.  Like in Illinois, this will result in fewer American jobs and therefore fewer overall tax dollars as these companies will instead choose to expand overseas.

Obama and others may label this as unpatriotic.  However, the fact is that these companies must answer to their investors as to the financial decisions they make.  If corporate tax rates are substantially higher in America than another potential location, then a decision has to be made that is right for the investors.

Illinois also raised its personal income tax rate to 5% from 3%.  That represents a 66% increase in the rate individuals pay in taxes to the Illinois Treasury.  Since that tax increase, from January 2011 through December 2011, the unemployment rate has risen in Illinois to 9.8% from 9.0%.  Unemployment rates declined in 46 states over the same period of time.

Yet, Illinois' own President Barack Obama is calling for increases in the personal income tax rate of American families earning over $250,000 per year by ending the Bush-era tax cuts and by making those earning $1 million or more to have a minimum tax rate of 30%.

When Obama released his budget, he quipped, "At a time when our economy is growing and creating jobs at a faster clip, we've got to do everything in our power to keep this recovery on track."

How, then, do massive increases in personal income taxes along with increases in corporate tax bills help to strengthen this economic recovery?  They don't.  These decisions are nothing short of job killers and will put the brakes on any economic recovery.  Just look at Illinois to see how these fiscal moves will work out for the overall nation.

The tax increases in Illinois were enacted under the guise of the enormous state deficit being whittled down by the supposed increase in tax revenues.  The opposite has occurred, as Illinois has added $2 billion more in debt in 2012 and now has a deficit of some $7 billion.

The talking points from President Obama about higher taxes and their necessity in order to pay down the debt are the same that were used in Illinois and will likely produce the same results for America.

It is this budget and tax theory that will be a cornerstone for the Obama campaign in his quest for a second term in office.  Voters would be wise to look to Illinois, which is far from a happy state these days, to see how personal and corporate tax hikes will ruin an economy and push more companies and jobs out of this country.

*Correction: John Deere has not also threatened to leave Illinois as erroneously reported earlier. We regret the error.

Chad Stafko is a writer and political consultant living in the Midwest.  He can be reached at stafko@msn.com

Back in the 1980s, tourism officials in Illinois coined the phrase, "Illinois, you put me in a happy state," as the sales pitch to would-be visitors to the Land of Lincoln.  Three decades later, President Obama's home state is far from a happy state.  What's happening in Illinois is a reminder of how destructive tax policy and bloated government can be on a people.

The state of Illinois increased its corporate tax rate to 7.0% from 4.8% in January 2011.  That's a 45% increase in the overall corporate rate.  Since that time, a number of companies, including industrial juggernauts such as Caterpillar* have threatened to move their corporate headquarters out of state.  In fact, Caterpillar made it clear to Illinois officials that it chose to build its newest manufacturing plant outside of Illinois due to the "business climate and overall fiscal health" of the state.  That plant would have added about 1,000 jobs to the state.

Other smaller businesses have followed suit and actually moved their corporate headquarters from Illinois to neighboring states.  Modern Drop Forge Co., which manufactures precision tools and has about 250 employees, along with Internet company, FatWallet.com, an employer of more than 50 workers, are among those businesses that have pulled up stakes and left since the corporate tax increase.

The exodus of companies and reluctance to expand in Illinois provide a great lesson to Obama and his cohorts who wish to increase taxes or limit tax deductions, which are essentially equivalent, on American companies.  Like in Illinois, this will result in fewer American jobs and therefore fewer overall tax dollars as these companies will instead choose to expand overseas.

Obama and others may label this as unpatriotic.  However, the fact is that these companies must answer to their investors as to the financial decisions they make.  If corporate tax rates are substantially higher in America than another potential location, then a decision has to be made that is right for the investors.

Illinois also raised its personal income tax rate to 5% from 3%.  That represents a 66% increase in the rate individuals pay in taxes to the Illinois Treasury.  Since that tax increase, from January 2011 through December 2011, the unemployment rate has risen in Illinois to 9.8% from 9.0%.  Unemployment rates declined in 46 states over the same period of time.

Yet, Illinois' own President Barack Obama is calling for increases in the personal income tax rate of American families earning over $250,000 per year by ending the Bush-era tax cuts and by making those earning $1 million or more to have a minimum tax rate of 30%.

When Obama released his budget, he quipped, "At a time when our economy is growing and creating jobs at a faster clip, we've got to do everything in our power to keep this recovery on track."

How, then, do massive increases in personal income taxes along with increases in corporate tax bills help to strengthen this economic recovery?  They don't.  These decisions are nothing short of job killers and will put the brakes on any economic recovery.  Just look at Illinois to see how these fiscal moves will work out for the overall nation.

The tax increases in Illinois were enacted under the guise of the enormous state deficit being whittled down by the supposed increase in tax revenues.  The opposite has occurred, as Illinois has added $2 billion more in debt in 2012 and now has a deficit of some $7 billion.

The talking points from President Obama about higher taxes and their necessity in order to pay down the debt are the same that were used in Illinois and will likely produce the same results for America.

It is this budget and tax theory that will be a cornerstone for the Obama campaign in his quest for a second term in office.  Voters would be wise to look to Illinois, which is far from a happy state these days, to see how personal and corporate tax hikes will ruin an economy and push more companies and jobs out of this country.

*Correction: John Deere has not also threatened to leave Illinois as erroneously reported earlier. We regret the error.

Chad Stafko is a writer and political consultant living in the Midwest.  He can be reached at stafko@msn.com