Illinois lost 218 businesses to other states in 2023, part of an acceleration to triple the rate of what losses were before the pandemic. When adjusted for population, Illinois ranked No. 2 for the most business losses.
The Illinois exodus isn’t limited to people: businesses are moving out of the state, and the rate is accelerating dramatically.
Illinois lost 2,616 businesses to other states from 1994-2023, data from the Bureau of Labor Statistics shows. For most of that time, the average loss was 65 businesses per year. The rate started accelerating significantly in about 2017 and has tripled since the pandemic.
Losing businesses to other states is nothing new in Illinois. Since the Bureau of Labor Statistics began tracking this data in 1994, Illinois has lost businesses to other states every single year.
The acceleration is what is new and troubling. Losses peaked at 260 in 2022 and were 218 in 2023, the most recent year of data. In terms of raw numbers, that was third in the nation, behind California losing 533 businesses and New York losing 278. But per capita, Illinois ranked No. 2.
Florida led the nation in attracting businesses from other states: 503 just in 2023. No other state attracted more than 160 migrating businesses.
The 2,616 businesses lost to other states from 1994-2023 put Illinois in third place for most losses. Again, when adjusted for the population, Illinois ranked No. 2 behind New York for losses during the 30-year period.
One of the major factors pushing businesses away from the state is Illinois’ unfriendly tax climate. Among the top and bottom five states for business migration, one clear trend that can be seen is states with the friendliest business climates tend to attract businesses, while those with more uncompetitive tax environments lose the most businesses.
Florida, Tennessee, Texas and North Carolina are among the leaders for attracting businesses from other states, while also offering tax climates that are in the top 10 in the nation for competitiveness, according to the non-partisan Tax Foundation. California, New York and Maryland rank at or near the very bottom in terms of tax competitiveness and business migration. Illinois and Massachusetts also come in among the bottom half of states on tax competitiveness.
If Illinois is to reverse its long-standing trend of pushing businesses away, state leaders need to seriously consider ways to improve the state’s tax climate. The most significant barrier would-be businesses face is the high tax burden inflicted in Illinois because of the state’s pension crisis. Investment expert Warren Buffet previously recommended companies avoid moving into states with large pension debt.
Only structural pension reforms enabled through a state constitutional amendment can truly solve Illinois’ pension crisis. A “hold harmless” pension reform plan such as one originally developed by the Illinois Policy Institute – based loosely on bipartisan 2013 reforms – could help to eliminate the state’s unfunded pension liability and achieve retirement security for pensioners.
