Tax incentives
In recent testimony before legislative
committees of the General Assembly,
spokesmen for the IMA and ISCC cited
tax incentives offered by "sunbelt"
states to heavy and light industry willing
to transfer operations there, and warned
that if Illinois continued its "anti-
business" attitudes, it could find itself in
a dilemma comparable to New York,
Ohio, Pennsylvania, Michigan and
other northern industrial states.
At a meeting in mid-April with Gov.
James R. Thompson concerning electric
utility rate reduction legislation, dubbed
"lifeline," public power company officials cited a report done for the ISCC
that indicated industry's general disenchantment with what they said was a
deteriorating business climate. The
report, conducted by Central Surveys,
Inc., of Shenandoah, Iowa, indicated Illinois industries consider the state's
taxes too high and unfair, labor's wages
too high without corresponding productivity, and federal taxes too high
without an equitable share being returned to the state. Nearly 80 per cent of
the respondents (1,083 businessmen and
industry officials were questioned) said
they felt Illinois had an unfavorable
business climate, and nearly half of the
large manufacturing firms questioned
said they have invested less new capital
in Illinois in the last 10 years than in
other states. Finally, about a third said
that they planned no facility expansions
in Illinois but would build new plants
out of state.
Just about anyone worried about
Illinois' business climate has a detailed
story about how some company decided
to move elsewhere, or expand elsewhere, because of the "anti-business"
attitude of state government, the unreasonable compensation insurance
rates or the extremely high wages won
by organized labor in recent contracts.
For example, when workers went out
on strike at the Bunn-O-Matic headquarters in Springfield recently, the
company packed up and went to Iowa.
But what might be a more typical
instance is that of a relatively small
manufacturing company, Burgess-Norton, Inc., of Geneva. A wholly-owned subsidiary of a multi-national concern, the smaller automotive parts manufacturer was hit as hard during the
slump of 1973-1974 as any company in
the industrialized North. Inventories
were allowed to deplete, an entire shift
of jobholders was laid off for nearly a
year. Then business began picking up in
early 1976. Orders began coming in
again. Employees were put back on the
payroll and inventories returned to
normal levels. Then the company
decided it needed to expand its warehouse space. But because of what it
called "unprofitable conditions in
Illinois," and because transportation
systems have expanded some distribution capabilities, the company built its
new warehouse outside Tulsa, Okla.,
and hired its workers from that area.
Incidents such as these, coupled with
the views of business officials, could
lead one into believing the exodus to the
sunnier climes of the South and Southwest is in full swing. But some studies do
not fully support this contention; the
loss of jobs appears to be much less
severe.
Richard Kolhauser, the assistant
director of the state Bureau of the
Budget (BOB), said that while there is,
indeed, a movement of industry and
labor out of Illinois; it is not dramatic
and does not, in fact, represent anything
more than a normal and equitable redistribution of the nation's production
capabilities.
Kolhauser's comments are supported
by an economic development research
report conducted for the U.S. Department of Commerce which says that
statistics showing changes in tax rates in
comparison to adjusted personal income, and statistics indicating the
migratory patterns of industry and
labor, should be viewed in the context of
tax and labor force levels in each area
over a fairly long period of time. That is,
when records provided by the Social
Security Administration show that
92,000 workers moved into the "sunbelt" states between 1973 and 1974, and
For example, after making adjustments for the cost of living, Illinois
citizens were shown to have more
disposable per capita income than the citizens of the other 24 states the study
compared. The studies indicate that the
migration of labor out of Illinois (whose
1976 force was put at nearly 4.5 million,
excluding agriculture) to the "sunbelt"
states was less than any other northern,
industrialized state. And according to
the U.S. Bureau of the Census, the
"sunbelt" south gained only 4.6 per cent
in population due to actual movement
of workers from the North to the South
from 1974 through 1976. All things
considered, the study seemed to indicate
that the movement to the "sunbelt"
region from the North is definitely there,
but so far has not been terribly disruptive.
Federal dollars
Illinois businesses point out that the
ratio of federal taxes paid to federal
dollars returned is not helping the state's
business climate. The studies show that the federal government spends more
money per person on welfare and
retirement programs in southern states
than it does in Illinois, even though, on
the whole, more money per person goes
to Northerners than Southerners for
these programs. At the same time,
Illinois taxpayers in 1975 paid the
second highest of the 25 states compared
in percentage of personal income in
federal taxes. It seems clear that Illinoisans are not getting their fair share of
federal dollars in welfare and retirement
programs. There are compensations,
however. Illinois' per capita income was
higher in 1975 at $6,789 than any state's
except Connecticut. The Commerce
Department reported in May that the
national personal income average rose
to $6,441 in 1976 from 1975's national
average of $5,903. Personal income rose
by 9.1 per cent in 1976 across the nation,
the department adds.
In the area of federal taxes collected
per person and federal dollars spent per
person for all programs, Illinoisans
(including children and the aged) paid
more to the federal government in
personal and corporate taxes than
individuals in all other states except
Connecticut and New Jersey. And
Illinois citizens got back less federal
money per capita than any of the
"sunbelt" states. But again, the report is
quick to note that Illinois residents have
one of the highest adjusted personal
income levels in the country.
On the labor scene, another report
shows that Illinois' loss in manufacturing jobs has nearly been offset by a
growth in the number of persons
working in wholesale, retail and government employment. The report, called
"Illinois Economic Growth Study," was
conducted for the state chamber by Dr.
A. James Heins of the University of
Illinois and was published in July 1976
after nine months of study. Heins' study
indicated that tax pressures are tight in
Illinois, but compared to other large,
industrialized states, Illinois is faring well.
One reason for Illinois continuing economic strength in the face of fluctuating national conditions is the state's
diversified economy, says BOB's Kolhauser. Illinois' general employment
distribution is very close to that of the
nation's as a whole, Kolhauser says. Illinois ranked first in agricultural and
manufactured exports in 1974 and 1975,
according to state budget bureau
August 1977 / Illinois Issues / 21
figures, and ranked second in the nation
for the number of insured banks and
savings and loans.
Another economic indicator used by
the state Department of Business and
Economic Development, shows that
Illinois and Texas had the smallest
decline in the growth rate of its total,
non-agricultural labor force when the
recession hit with its full impact in early
1974, continuing in some states even
through the first half of 1977. Again,
says Kolhauser, this was because of
Illinois' diversified economy, which
includes major rail, air and shipping
lines operating out of Chicago, a
concentration of large banks and insurance companies keeping capital
investments at growth levels and the
nation's largest high sulfur coal reserves.
The U.S. Department of Labor reported
that through 1975, Illinois' personal per
capita income grew only slightly less
than did the state's manufacturing
investment rate.
Mixed report
The studies discussed above give a
mixed report of the business climate in
Illinois. All of them contain both good
and bad news, and — depending on
which is stressed — either an optimistic
or a pessimistic outlook of Illinois'
business climate can be arrived at. The
bottom line, in short, is not easy to
determine. By way of summary, however, this much can be said. Illinois, like
every other state was hurt by the recent
recession, but not as badly as most
states. Federal tax dollars paid by
Illinois individuals and businesses are
comparatively high, and federal aid
dollars returned to the state are comparatively low. Personal income in
Illinois is quite high in comparison with
other states, so is disposable income.
The much-discussed exodus of business
and workers to the "sunbelt" is not
nearly as bad as in other northern states,
and, although it is a source of continuing concern, this movement should
be seen as part of a steady and long-term
redistribution, and not the beginning of
economic disaster for the state. Finally,
Illinois' business climate, like the
weather, will continue to show many
temporary variations, but the state's
strengths in agriculture, industry,
transportation, coal and finance should
insure that it remains generally stable
over the long haul.
