Topinka’s first “idea” turns out to be a dud

By John Biver
What kind of “Economic Plan” do you propose if you’re running for governor after serving a quarter century in state government but still have no idea what to do about the state’s lousy business climate? Judy Baar Topinka has provided the answer.


The Journal-Register’s Bernie Schoenburg reported that Topinka’s plan includes:

  • “Tax credits for newly created jobs.”
  • “Replacing (only) the leadership of the existing state commerce department” (Topinka “told reporters that the nearly 500 people working there would remain on the job.”)
  • The creation of an “Illinois jobs partnership” modeled after efforts in other states including Indiana and Florida. The partnership would be a 15-member, nonsalaried board to oversee job creation. It would include, she said, representatives of large and small businesses, organized labor and economic-development professionals, and their appointments would be subject to Senate approval.

Schoenburg also reported the administration’s response:

“I’m not surprised that Treasurer Topinka’s so-called plan doesn’t include any new ideas and is dismally void of details given that her job creation record is full of failures,” Blagojevich spokeswoman Sheila Nix said in the statement. Nix said Topinka should know that Blagojevich “already offers tax incentives to help create jobs.”

Topinka left out a pledge to not raise the income tax.


Topinka’s plan is typical of what you get from those Illinois Republicans who refuse to learn or face economic reality. They seek to avoid offending anyone and being bold is a no-no. Instead, they tweak and meddle and by all means avoid even the suggestion that government employees might lose their job.


If Illinois Republicans are ever going to get serious about the Illinois economy, they’re going to have to learn from organizations like the Tax Foundation which believes that “targeted tax incentives are bad economics and poor public policy.”


Here are a few extended excerpts from a recent Tax Foundation report. The Radar has bolded and italicized key statements:

State lawmakers are always tempted to lure business with lucrative tax incentives and subsidies. This can be a dangerous proposition, as a case in Florida illustrates. In July of 2004 Florida lawmakers cried foul because a major credit card company announced it would close its Tampa call center, lay off 1,110 workers, and outsource those jobs to another company. The reason for the lawmakers’ ire was that the company had been lured to Florida with a generous tax incentive package and had enjoyed nearly $3 million worth of tax breaks during the past nine years.


Lawmakers create these deals under the banner of job creation and economic development, but the truth is that if a state needs to offer such packages, it is most likely covering for a woeful business climate plagued by bad tax policy. A far more effective approach is to systematically improve the business climate for the long term so as to improve the state’s competitiveness as compared to other states.

* * * * *

The ideal tax system – whether at the state, federal, or international level – is neutral to business activity. In such an ideal system, individuals and businesses would base their economic decisions solely on the merits of the transactions, without regard to tax implications. In reality, tax-induced economic distortions are a fact of life, and a more realistic goal is to maximize the occasions when businesses and individuals are guided by economics, and minimize those cases where economic decisions are micromanaged or even dictated by a tax system. Therefore, the most competitive tax systems, and the ones that score best in the SBTCI (State Business Tax Climate Index), are those that create the fewest distortions by enforcing the most simple tax system based on broad bases with low rates.


How much states collect in taxes is critical, but how they take it is also important. In other words, quite apart from whether a state’s total tax burden is higher than in other states, it can enact (and many states do) a set of tax laws that cause great damage to the economy. The SBTCI does not allow states with poor tax regimes to hide behind low tax burdens.


Good state tax systems levy low, flat rates on the broadest bases possible, and they treat all taxpayers the same. Variation in the tax treatment of different industries favors one economic activity or decision over another. The more riddled a tax system is with these politically motivated preferences the less likely it is that business decisions will be made in response to market forces. The SBTCI rewards those states that apply these principles in five important areas of taxation: individual income taxes, major business taxes, sales taxes, unemployment insurance taxes, and taxes on wealth or assets such as property.

A campaign is the perfect time to begin explaining some of these concepts in a simple, straightforward fashion. None of the above is complicated – and good communicators can condense the meaning into a few effective sentences.


Sure, it takes work. But Illinois’ state government is a mess decades in the making and it’s going to require a lot of work to fix it. Part of the work involves thinking. Fortunately, school is always in session at the Tax Foundation. Click here to enroll.



John Biver is a veteran of politics and government and is a resident of Illinois.