Guest Column: Fixing Illinois, part three: Steps to a stronger Illinois economy

May 28, 2014

James D. Nowlan (left) and J. Thomas Johnson

James D. Nowlan (left) and J. Thomas Johnson

Editor’s note: The following is the third installment of four in a series drawn from the new book Fixing Illinois, by James D. Nowlan and J. Thomas Johnson. Click here to view part one and click here to view part two.

By James D. Nowlan and J. Thomas Johnson

The Illinois economy has been struggling. In January 2014, the state’s unemployment rate was 8.7 percent, second highest in the nation. From our employment peak in November 2000, Illinois lost 656,000 jobs and has regained only 257,000.

What can be done about our parlous situation?

We asked the experts — the state’s economic development professionals, the men and women who recruit businesses to their communities.

The 70 economic specialists who responded to our survey were blunt. Illinois should, they said, take the following steps:

1. Reduce workers’ compensation liability insurance costs;

2. Reduce the corporate income tax;

3. Put the state’s fiscal house in order;

4. Provide stability and predictability about the future; and

5. Change the perception that Illinois is a corrupt state in which to do business.

As for workers’ compensation rates, the state needs to follow 29 other states by enacting a law that requires the workplace to be the prevailing or primary cause of an injury before claims are compensable.

At present, all lawyers for the injured have to do is persuade an arbitrator that the workplace “might have” or “could have been” a contributor to the injury, even if the injury occurred outside the workplace.

At 9.5 percent, the state’s corporate income tax rate is fourth highest in the nation and sticks out like a sore thumb. For many foreign investors, the corporate tax rate is the most relevant tax in their investment decision. The rate should be reduced to no more than 7.3 percent, where it stood before the 2011 tax increases.

In other essays, we have discussed how to put the state’s fiscal house in order and provide stability and predictability. In sum, we should broaden our income and sales taxes to encompass faster growing sources of revenue and reduce the rates of these taxes.

Three out of four of the respondents to our survey of economic development professionals said that perceptions of corruption in Illinois were either “a factor from time to time” or “an important, negative factor” in efforts to market their areas to businesses from out of state.

To change a culture of corruption over time will require such actions as creation of a permanent, high-profile state commission on turning “The Illinois Way” of doing business from a negative about corruption into a positive statement of integrity in government.

The campaign could include workshops on ethics for all newly elected local and state officials as well as increased emphasis on ethics in social science studies.

Illinois also has to do a better job of marketing itself to the world. We have hundreds of fragmented, parochial economic development units in the Midwest that consider it a victory to attract business jobs from one community to another, when that doesn’t increase the number of total jobs.

It would be better for Illinois to take the lead in developing a Midwestern version of the Southern Growth Policies Board. A nonpartisan think tank, the Southern group focuses on innovation and technology, globalization and the changing nature of the workforce. Each year, the board releases a report on the future of the South.

Like Illinois, the Midwest has been lagging the nation in economic growth. We need to compete, not among ourselves, but with the world.

As for tax incentives, rather than award $150 million to keep a struggling, mature company in Illinois, our state would be much better off to grant $30,000 each to 5,000 startups to locate here, as entrepreneur Aksh Gupta has recommended.

Illinois has great strengths in infrastructure, location and workforce talent. We must have more confidence in these strengths and in our capacity to market to the world.

James D. Nowlan and J. Thomas Johnson are former presidents of the Taxpayers’ Federation of Illinois. Their book, Fixing Illinois: Politics and Policy in the Prairie State, is a primer on Illinois state government with 90-plus suggestions for change.

Posted May 28, 2014

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