I live south of U.S. 30 in the Boone Grove area of Porter County. Every day I cross 30 in the morning on the way to the Valpo Y. I can remember often cruising through the stop light at 30 and Rt. 2 without materially slowing down. Those days are over. This stop light, despite the widened lanes and better traffic pattern, is now a consistent two-cycle stop light at 7:15 a.m. And with major developments planned along Rt. 2 south of Valparaiso, it’s not going to get any better.
Now, I would whine about this more loudly, except that business has recently begun taking me into west Lake County, namely the St. John area, on a more frequent basis. Oak Partners is in very preliminary due diligence for a possible new office in this fast growing area, and boy, do you want to talk about traffic? It's crazy out there, driving my blood pressure higher with every trip.
My wife Tracy and I were lamenting about all the new traffic in our lands the other day, one of us asking the rhetorical question, “Where are all these people coming from?” Well, any true Regionite knows the corresponding rhetorical answer we always provide to this question. We blame Illinois of course. In our minds they are all fleeing Illinois.
Given the Region’s strange relationship with the state of Illinois and the city of Chicago in particular, this is always going to be our paranoiac answer, but given the most recent data available from the U.S. Census Bureau, it looks to be accurate as well. Between 2016 and 2020 the U.S. government census data tells us around 22,000 people migrated from Illinois to Lake, Porter and LaPorte counties in Indiana. That’s a lot of new houses, new neighborhoods and new traffic, and who knows what happened during the later COVID years.
From a business perspective, this trend has also been apparent. Oak Partners has a number of newer relationships with Illinois migrants. Of course, in getting to know our new friends we invariably ask what brought them to the area, and the answers are consistent: property taxes, home values and now the ability to work remotely. Mixed in are occasional comments about politics, but this isn’t as common as one might think.
There are indeed some material tax differences between the two states. On the property tax side, Lake County shows an average property tax rate of 2.63% of assessed value, while Porter county shows 1.84%. (source: Indiana.edu). In contrast, Illinois property taxes are based on an opaque assessment calculation, with multiple taxing authorities levying value based property taxes in some municipalities, leading the average property tax rate in the Chicago area to be roughly 6.68% of assessed value in 2021 (source: Smartasset.com). Quite a difference.
On the income tax side, the numbers are a little better. Indiana has a flat income tax of 3.15%, with some counties levying an additional 0.25% on income (source: Indiana DOR). Illinois, on the other hand, has a tax rate of 4.95%, but one very attractive tax rule for retirees is that Illinois does not levy income tax on Social Security, pension or IRA distribution income, which can be a major benefit.
As far as the money we spend, the tax rates are more attractive in Indiana as well. Sales tax in Indiana is a flat 7%. Illinois levies a sales tax rate of 6.25% but then also permits municipalities to levy sales taxes up to 4.75%, leading the average sales tax in Illinois to be 8.82%, and sales tax in the city of Chicago to be a whopping 10.25% (source: AARP).
And to top it off, Illinois still has an estate tax on estates over $4 million, which applies on all estate property domiciled in Illinois, regardless if the deceased owner was a resident of Illinois.
So, apparently all these tax differences can really add up, which in my experience is driving much of the in-migration being experienced in the communities of the Region.
Perhaps my favorite comment from a new former Illinoisan neighbor, exclaiming their excitement over “discovering” Indiana was “we just can’t believe how much money we are saving in taxes, and you know what? There are actually some good places to eat here as well.” To which I could only smile and respond, “Yes, we do eat here in Indiana, and sometimes we even eat out”. Welcome, Illinois friends.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. No investment strategy can guarantee a profit or preserve against loss. Past performance is not a guarantee of future results. This material may contain forward looking statements; there are no guarantees that these outcomes will come to pass.
Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.
