One reason is that many students who leave the state for college don’t return. The analysts call this “brain drain.” “Only New Jersey lost more college-aged individuals out of state who never returned,” Mr. Kennedy says. Hmmm. What do the two have in common?
High taxes, for one. Illinois’s effective residential property tax rate (1.97%) in 2019 was second only to New Jersey’s (2.13%). Illinois’s flat 4.95% income tax is relatively low, though its 9.5% corporate rate is among the highest in the country. Hefty business taxes have suppressed job growth, and young people are following employers out of the state.
The state is also losing children. Its under-18 population has declined by 350,000 over the last decade. Lousy schools may be driving away young families. Out-migration of young people is triggering a demographic and fiscal time bomb like the one that eventually bankrupted Puerto Rico.
Illinois doesn’t tax retirement income such as 401(k)s or public pensions. This tax perk may help keep some seniors from leaving. But a shrinking population of prime-age working people and children means a smaller tax base will have to support growing retirement liabilities. Folks who stick around will have to pay higher and higher taxes.