Illinois - #37 Overall

The overall freedom ranking is a combination of personal and economic freedoms.
+7
Change since 2016
Overall
#1
+7
CHANGE since 2016

Analysis

Illinois used to be a relatively decent state for economic freedom, although it almost always did much better on fiscal policy than on regulatory policy. But the state has lost some of that edge while also, not surprisingly, losing some of its economic vitality; its well-publicized woes with employee retirement spending threaten to drive local taxes and debt higher. It is also one of the most cronyist states. Illinois did post one of the most dramatic improvements in personal freedom rankings we have ever seen between 2011 and 2017, and there is some sign that the fiscal situation has stabilized.

In FY 2020, Illinois’s state-level taxes were about at 21st-century historic averages for the state, at 5.6 percent of adjusted personal income, and down from highs posted six and seven years before. The bigger problem is that local taxes are among the worst in the country, at 5.1 percent of income. However, residents have a good choice among local jurisdictions, with almost two effective competing governments per 100 square miles. The overall tax burden is 10.7 percent, much higher than average. Government GDP is quite a bit lower than the national average, but debt is quite high at 23.7 percent today, well above the average (although down from its height during the Great Recession), and cash and security assets are mediocre and have slid somewhat recently. Government employment, at 10.6 percent of private employment, remains significantly below the national average.

Regulatory policy has been a drag on Illinois’s rankings throughout the time series. After California, it is the most cronyist state in America. It does reasonably well on land-use and insurance freedom but quite poorly on civil liability and occupational and labor freedom. Illinois’s land-use freedom, generally a strength, has declined over time as it has pretty much everywhere else in the face of growing local zoning restrictions. The state’s minimum wage at $11.00 an hour is now higher than it has ever been since 2000 as a percentage of the median wage. Unlike its neighbors, Illinois is not a right-to-work state. Renewable portfolio standards have been gradually tightened, raising electricity rates. In 2017, the state removed all telecom wireline regulatory authority. It had already enacted statewide video franchising. Licensing is extensive, but most of that growth occurred between 2002 and 2007. Nurse practitioners are highly constrained. Direct auto sales for Tesla were legalized in 2013/14. The state has been a fixture on the list of “judicial hellholes,” with Madison and Cook Counties listed in 2017/18. Illinois is one of the few states that have apparently not improved their tort systems at all during the past two decades.

Illinois was long our bête noire on personal freedom, but that has dramatically changed with federal court decisions that have overturned some extreme restrictions on gun rights, the legalization of same-sex marriage, marijuana reform, and the availability of driver’s licenses to people without Social Security numbers. It is now comfortably in the middle of the pack. Illinois’s new concealed-carry law, begrudgingly enacted by the legislature, is technically shall-issue but remains one of the country’s strictest. The state still has local “assault weapon” and large-capacity firearm magazine bans, waiting periods for gun purchases, background checks for private sales, permitting of buyers for some weapons, local registration of some firearms, mandatory locking devices, and so on. Even fireworks are heavily regulated. Alcohol freedom is better than average, with no state role in distribution and wine and spirits available in grocery stores. Beer and wine taxes are decent, but spirits taxes are high. Formerly one of the most restrictive states for cannabis, Illinois became the very first to legalize cultivation and sale through the legislative process (as opposed to ballot initiative) in 2019. Legal gambling is expansive, and the state is near the top in this category. Educational freedom is reasonably good, as virtually no restrictions are placed on homeschools or private schools. And the state has intradistrict school choice and expanded a tax deduction law for parents’ educational expenses in 2017. Smoking bans are comprehensive, and cigarette taxes are among the very highest anywhere ($7.16 per pack in Chicago). Civil asset forfeiture was partially reformed in 2017. Illinois is in the middle of the pack on incarceration and arrests for the victimless crime category. Drug arrest rates are now below the national historical average after having been more than 5 standard deviations higher as recently as 2007.

Policy Recommendations

  • Fiscal: Reform the retirement systems of localities to reduce local taxes, which are sky-high.
  • Regulatory: Reform the civil liability system by capping punitive damages, setting the standard for punitive damages at “beyond a reasonable doubt,” and abolishing joint and several liability.
  • Personal: If serious about reducing smoking, preempt local flavored e-cigarette sales bans and vaping bans in bars and restaurants.