Illinois and other states have recently made headlines for their declining populations. Whether they realize it or not, what states like Illinois are learning the hard way is that over-taxing and over-regulating has consequences. And Illinois is now learning that one painful consequence is job loss.
Caterpillar, a Fortune 500 company that employs 23,000 workers in Illinois, currently finds itself dealing with a new tax increase in an already over-taxed state. Their CEO, Doug Oberhelman, sent a warning shot on March 21st with a letter to Illinois' new Democrat Governor Pat Quinn:
"I want to stay here," Oberhelman wrote. "But as the leader of this business, I have to do what's right for Caterpillar when making decisions about where to invest. The direction that this state is headed in is not favorable to business, and I'd like to work with you to change that."
The "direction" Oberhelman refers to is the economic sinkhole that Governor Pat Quinn recently plunged Illinois deeper into by raising taxes on employers by 30%. Overnight, Illinois went from having the 21st highest overall corporate tax rate in America to the 3rd.
In today's global economy, that is not the direction we want to be heading. Along with a 35% federal corporate tax rate -- soon to be the highest corporate rate in the entire world -- it's no wonder that companies are fleeing Illinois and the U.S.
I was reminded how other states view Illinois recently, when I moderated a panel of three current U.S. governors. When the subject of Illinois came up, the governors burst out laughing and apologized to me in advance for stealing away businesses for their own states. They each knew that the recent tax hike on employers in Illinois opened the door for them to entice employers in the Land of Lincoln to move to their own states.
What's happened here is that decades of reckless government spending has forced places like New Jersey and Illinois to increase taxes time and time again. The path to economic recovery, debt reduction, and job creation is not through tax increases, however, but through cutting spending and reforming our onerous tax code -- the single greatest thing we can do to give job-creators more confidence in their futures.
Our current tax code punishes American companies for success time and again. Rather than enticing our companies to stay, it actually encourages them to head elsewhere for a more friendly business environment. And rather than create a better business environment, Illinois chose to double down on those failures, and our citizens will pay the price.
States and countries that avoid the missteps of endless higher taxes and regulations are on the right path to prosperity. As Caterpillar showed last week, those places will soon reap the benefits of smart economic policy, and leave others in the dust.