John Smith CFP
Balasa, Dinverno Foltz
As Illinois continues to work through its financial woes, there has been much discussion and debate surrounding Illinois residents and businesses choosing to leave, particularly for neighboring states. Although Illinois (not unlike other states) is suffering from a negative migration trend, beneath it all are some interesting facts:
How satisfied are Illinois residents? – A 2014 Gallup poll ranked Illinois as the top state for residents who would move if they could (50% of residents vs. the 33% national average). The same poll also ranked Illinois at the top for residents who say their state is the worst state to live in (25% of residents vs. 17% for 2nd place Rhode Island).
Population Growth and Migration – Illinois population growth has averaged approximately 2.8% per year from 2002 – 2014. This is 42nd in the nation and lower than all of the Illinois neighboring states except Michigan. The Illinois top 10 migration states (in order) are: Florida, California, Indiana, Texas, Wisconsin, Missouri, Iowa, Michigan, New York and Arizona. Almost 20% of AGI out flow goes to the tax-friendlier border states of IN, MO, IA and MI. Over 20% of AGI out flow goes to the tax-friendlier and warmer climate states of FL, TX and AZ.
Business Environment and Unemployment: For the year ended June 30, 2013, Illinois state and local business taxes totaled $32.3 billion, representing 5% of the total output of goods and services. This ranked as the 14th highest business tax burden in the country and a higher burden than any Illinois border state.
Although the above statistics may seem startling, there are two sides to a coin.
Illinois Tax Benefits: Based on BDFs white paper “The Best States to Retire In from an Income Tax Perspective”, Illinois ranks 19th overall. Illinois’ state income tax of 3.75% ranks 13th and since Illinois does not tax retirement plan withdrawals or pension income, the state receives a top ranking in this regard.
A Closer Look at Migration: When analyzing migration statistics, although Illinois has suffered from migration more than its neighboring states from a gross revenue perspective, when adjusted for each states GDP and total AGI, migration trends have been strikingly similar. In addition, 3 of the top 4 Illinois migration states are not border states and instead have a much milder climate AND a friendlier tax policy (except for CA).
There doesn’t seem to be a day that goes by in which Illinois residents are not faced with the doom and gloom scenario of the state’s current financial condition. As the facts above show, while Illinois does have its share of financial problems, and residents are becoming increasingly impatient, Illinois has some significant tax advantages, particularly for retirees who rely on IRA and pension income. At BDF, your wealth management team is always here to help weigh the tradeoffs of a change in your personal or business financial plan whether you choose to stay in Illinois or go.
John can be contacted at (630) 875-4905 or via e mail at email@example.com