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By The Numbers: Problems For Illinois

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By John Dodge

CHICAGO (CBS) — What’s wrong with Illinois?

Compared with neighboring states: A lot.

Based on several economic indicators tracked by the U.S. Bureau of Economic Analysis, the Land Of Lincoln continues to struggle.

Unemployment is the second-highest in the country at 8.7 percent. Only Rhode Island is worse.

By comparison, Michigan has slashed its rate significantly in the past four years, and is now at 7.7 percent. Indiana and Wisconsin have also made greater reductions and each stand at 6.1 percent.

In 2011, Gov. Pat Quinn pushed through a massive 66 percent hike in the state’s income tax from 3 percent to 5 percent. The state also ramped up the corporate income tax from just over 7 percent to 9.5 percent.

The state income tax increase was supposed to be temporary to help ease the state’s massive budget deficit, caused in large part by billions of dollars in uncovered pension payments for state workers. The tax hike did little to ease the pension crisis, and lawmakers were slow to come up with meaningful pension reform.

In Indiana, the state tax rate is 3.5 percent. Although counties there tax residents’ income, it is still less that Illinois’ tax. Michigan’s income tax comes in at 4.25 percent, while Wisconsin’s highest bracket is just over 7 percent.

It is also more expensive to live in Illinois, compared with its neighbors.

According to the Bureau of Economic Analysis, Illinois spends about 0.5 percent more than the national average for goods and services.

That wouldn’t be so bad, except that the other three states are remarkably cheaper: Michigan residents pay an average of 5 percent less, Wisconsin 7.5 percent less and Indiana 8 percent less.

As for Gross Domestic Product, a key indicator of a state’s overall economic health, Illinois lags there, too.

The 2012 GDP growth for the four states: Wisconsin 1.5 percent, Illinois 1.9 percent, Michigan 2.2 percent and Indiana 3.3 percent.

One bit of good news: Illinois residents per capita personal income is easily the highest among the four states at $46,780. However, as previously noted, it’s more expensive to live in the state.

Also, Illinois residents’ personal income growth is the slowest among the four states, and below the national average of 2.6 percent.

In its online opinion section, the Wall Street Journal on Wednesday noted that the Democratic leaders in Illinois “have been pursuing their blue-state model of higher taxes and union-dominated government. Neighboring states since 2010 have gone for lower taxes and union reform.”

To be fair, Quinn inherited a lot of this mess. The pension crisis has been brewing for years without any efforts to reform. And the state’s last Republican governor, George Ryan, increased fees (avoiding an income tax hike) to pump up public spending.

Taking politics out of the equation, the numbers continue to signal a tough road for Illinois.

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