Indiana Governor Mitch Daniels: Illinois Tax Hike Good News For Indiana Business

As Illinois lawmakers prepare to pass a massive state income tax hike, Indiana Governor Mitch Daniels says his state will welcome business owners who aren't too keen on the 67 to 75 percent tax hike.

"We already had an edge on Illinois in terms of the cost of doing business, and this is going to make it significantly wider," Daniels, a Republican, told the Herald-Review on Monday.

As soon as Tuesday, Illinois lawmakers are hoping to pass legislation that would boost the personal income tax rate temporarily by up to 75 percent, pushing the current rate of 3 percent as high as 5.25 percent. Monday night, lawmakers told WBEZ the increase would now be about 67 percent, since they could not find the support needed for the bigger increase.

In sheer percentage terms, the Illinois proposal could be the biggest tax increase on the long list of increases states have passed as they grappled with recent economic woes. Also, according to the The Tax Foundation, a nonpartisan tax research group in Washington, the hike would force Illinois businesses to pay the highest combined national-local corporate tax rate in the industrialized world.

"Folks in Illinois will eventually have to decide: Is this working well enough for us or do we want something different?" Daniels said to the Northwest Indiana Times. "Point one of our anti-recession strategy here is to avoid doing what they've now decided to do."

During last year's campaign season, Gov. Pat Quinn told voters he would work to pass a tax hike to combat the state's $13 billion deficit--but initially predicted the hike would be a lot smaller. At the time, Quinn said there would be a 33 percent increase, which he said would go toward education initiatives.

"I believe this 1 percent for education makes sense, and I think the people of Illinois will understand," Quinn told the Tribune in March of last year. "We must invest in the future, even in these tough economic times...This is urgent."

The increase could generate $7.5 billion a year, enough to balance the annual budget and begin chipping away at a backlog of unpaid bills. The state regularly falls months behind in writing checks to schools and universities, businesses that build roads or rent offices to the state, and organizations that provide a vast array of social services.

Indiana's Daniels said that Illinois residents "get what they vote for," and in this case it was a Quinn-backed tax increase. He also told the Northwest Indiana Times he felt sorry for the "suckers" who do business with the State of Illinois and are not paid in a timely fashion--if at all.

"It does show that you can make very different choices, and the contrast between the choice we've made and the one they have is stark," Daniels said.