February 2, 2025
The Great State of Illiana (or is it Indinois?)
It is hard to resist trolling Illinois, especially Chicago. I’ve done so myself on occasion. After all, Chicago is a city with too many governance flaws to list in a single column. But they also enjoy a few strengths. The Chicago Metro area is bigger, richer, better educated and its workers substantially more productive than Indiana as a whole.
Still, its fun to troll a place like Chicago, and Todd Huston, who must be ranked as among the most serious and effective legislative leaders in the country, did so earlier this month. The story is worth telling.
Many downstate Illinois residents dislike Chicago’s strong influence in the state. Last year, a total of 33 counties voted to secede from Illinois and form their own state. Mr. Huston invited those counties to join Indiana. He even created a Commission to study the possibility.
That’s first-rate trolling.
I thought it’d be fun to think through the prospect of Indiana picking up these 33 counties. Would it be good for Indiana? Would it be good for those counties? Would it be good for the remaining 69 Illinois counties?
The ‘secessionist’ counties in Illinois are in the southern part of the state, with many bordering Indiana. This one-third of counties comprise only 6.6 percent of the Illinois population, and only 4.0 percent of the state’s economy.
Per capita income in the secessionist counties is $54,381. If it were a separate state, it would be the second poorest state in the union, sliding right in between Mississippi and West Virginia. The remaining counties in Illinois enjoy per capita income of $73,228.
Adding the secessionist counties to Indiana would cut our per capita income enough for us to slide from 14th to 11th place from the bottom. Only 18.6 percent of adults in these counties have completed college, while the Illinois total is 36.7 percent. This new ‘secessionist’ state would instantly be the least well-educated state, and would be right about where the USA as a whole was in the late 1980s.
Economic growth in the secessionist counties has been at about half the rate of the rest of Illinois so far this century. And, while the rest of Illinois has experienced very modest population growth of about 1.4 percent, these secessionist counties have lost a whopping 5.2 percent of their population.
If the secessionist parts of Illinois were their own state, they’d have the worst 25 years of population loss of any state in U.S. history. So, it’s pretty easy to see why these counties might be unhappy about their economic conditions. They are truly dismal.
But how much of this is plausibly the fault of Illinois state government? After all, the other Illinois counties are doing much better. That includes Chicago, where the economy continues to be robust, even as population growth has stalled. Is it possible that these counties are somehow being robbed of economic opportunity by Illinois?
Nope. As it turns out, these counties are essentially welfare queens of the state of Illinois.
A pair of researchers at Southern Illinois University’s Paul Simon Public Policy Institute (see https://paulsimoninstitute.siu.edu/) publish reports every couple years on the flow of public budgets across Illinois (see https://opensiuc.lib.siu.edu/ppi_papers/59/). This very detailed work by John Jackson and John Foster makes it possible to see where the tax dollars are flowing across the State of Illinois. And, for what it is worth, that is very much like a study I did for Indiana more than a decade ago with colleagues Dagney Faulk and John Ketzenberger (see https://projects.cberdata.org/reports/IFPI_IntrastateTax.pdf).
As it turns out, residents in these secessionist counties pay about $2,986 per person each year in state taxes. That would make them the fourth lowest-taxed residents in the nation. But, here’s the rub, they receive $5,430 per person each year in support from residents of the other 69 Illinois counties.
In contrast, the rest of the state collects $4,485 in state taxes each year, and gets back $4,217 per person each year in state spending. So, each resident of the secessionist counties gets $2,444 more state dollars spent in their county each year than they pay in taxes. On top of that, they pay only 66.6 cents for every dollar of taxes residents in the other 69 Illinois counties pay.
Federal taxes and spending tell a similar story. A recent study of mine calculated the share of taxes and transfer payments made at the county level to the federal government (see https://jrap.scholasticahq.com/article/127868-federal-fiscal-exposure-of-us-counties). You guessed it, the secessionist counties pay a lower federal tax rate, but receive more in Social Security payments and in other types of transfers (TANF, SNAP, etc.) than the counties that did not vote to secede from Illinois.
There are some useful lessons here.
First, the secessionist counties of Illinois pay low state taxes but are beneficiaries of enormous transfers from the rest of Illinois. It is hard to pinpoint just what these Illinois secessionist counties are angry about. Most likely it is bad vibes borne of ignorance. There’s compelling evidence of that.
If they do come to Indiana, Hoosier taxpayers will need to pony up almost $2 billion more per year to match the fiscal largesse those secessionist counties receive from the rest of Illinois. It is worth noting that those taxes are going to come primarily from urban areas, like Fishers, Carmel and Indianapolis.
So no, we don’t really want them—though it is easy to see why Illinois might not want them either.
Second, neither the Red State and Blue State models of rural development have worked. The secessionist counties of Illinois look just like 40 or 50 declining rural counties in Indiana. Both Illinois and Indiana policymakers are failing their rural counties, though most of the blame for economic decline belongs squarely with the voters of those rural counties.
Finally, the real political divisions in America are geographic. So far this century, a whopping half of all the population growth this century has occurred in just 75 out of 3,143 U.S. counties or 2.3 percent. Fully 45 percent of U.S. counties have lost population this century.
This deep economic divergence has gripped the United States for four decades. It is not between Red or Blue states, or places with high taxes or woke policies. It is primarily between urban and non-urban counties, and reflects the desire of most Americans to live in places with strong local public services—great schools, low crime, and businesses that offer a mix of goods and services. Places that offer these do well, those that do not will look more and more like rural Illinois.
About the Author
Recent
The Great State of Illiana (or is it Indinois?)Deep economic divergence has gripped the United States for four decades.
A Whirlwind Policy Start to the YearGov. Braun and General Assembly have proposed a number of changes.
My 2025 ForecastThe Hoosier economy is growing, but at the same time falling further behind the rest of the nation.
The Legacy of Eric Holcomb’s AdministrationIndiana’s economy is better than it was when Holcomb took office, but there are some caveats.
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