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By: Ted Dabrowski and John Klingner

Sears, once the “king of retailers,” is a shell of its former self. The Illinois-based company has been losing market share to its rivals for decades. Its products are out-of-date, its credit is in the tank and trust in management has disappeared. Sears’ customers have fled the once proud and iconic company.

So, imagine how ludicrous it would be if Sears announced a turnaround plan based on just one thing: price hikes. No operating reforms, no change in strategy, no improvement in products – just price hikes. For sure, that’d be the final nail in Sears’ coffin. 

Such a strategy might sound absurd, but it’s precisely the approach politicians are pushing in Illinois.

Springfield lawmakers are shunning structural spending and pension reforms. They’re ignoring term limits, redistricting reform and real changes to lobbying rules. The only thing pols want to push is a multi-billion-dollar tax hike via a new progressive tax scheme. 

It’s their version of a price hike and it’s their panacea for all of Illinois’ woes. It’s a foolish strategy that will only prove destructive to a state in steep decline.

Illinois already bleeds more residents than any other state in the country except New York (Appendix 1). Illinoisans are already burdened with the highest taxes in the nation, according to Kiplinger (Appendix 2). Property values, adjusted for inflation, are falling in Illinois, bucking the upward trend across the rest of the nation (Appendix 3). And corruption is rampant, as evidenced by the growing list of local and state officials indicted or under investigation.

No matter how it’s structured, a progressive tax scheme will only make each of those things worse.

A sad comparison

Sears dominated retail sales in the 20th century and was once the nation’s largest employer. “It was the Walmart and Amazon of its day, combined.”

But by the turn of the century, Sears began to fall behind. Products and management styles evolved and Sears failed to adapt as new competitors arose.

Other retailers upgraded their stores while Sears stores fell into disrepair. As a result, Sears lost customers, it shuttered locations and its debts continued to rise. The company has been in a downward spiral ever since.

Illinois has suffered a similar history.

In the middle of the 20th century, Illinois was a beacon of prosperity for people all over the world. Foreigners flocked here to achieve the American Dream, and other Americans came north during the Great Migration. Illinois’ population exploded and the state became a dual machine of agriculture and industry.

But Illinois, too, began to fall behind near the end of the century. While other states like Indiana and Wisconsin adapted to competition by implementing labor, spending and tax reforms, Illinois doubled down on its failed policies.

The major cracks began to show themselves in the early 2000s, and since then, Illinois has gone from beacon to basket case. Illinois is now a national outlier on almost every financial, economic and demographic factor you can think of.

The lesson for Illinoisans

Expect hundreds of millions of dollars to be spent trying to convince residents to support or oppose a progressive income tax structure in Illinois. Illinoisans will vote on the November 2020 ballot whether or not to replace the state’s flat tax with a structure that taxes higher incomes at ever-higher rates.

The airwaves will be bombarded with purely emotional campaigns full of misinformation. And you can bet you’ll hear “facts” that are entirely contradictory. You’ll be sick of both sides long before the actual vote next year.

So, what to do? At some point, you’ll have to block out all the noise and use common sense to figure out the reality of Illinois’ proposed progressive tax.

The questions you might ask yourself are: Will yet another tax hike stop the flight of hundreds of thousands of Illinoisans each year? Will a multi-billion dollar tax increase – and the expectation of more hikes – lead to lower taxes? Will more tax hikes lead to increases in home values? Will more tax dollars in the coffers of Illinois politicians lead to less corruption? 

The clear answer to all those questions is no.

Only structural spending and governance reforms can reverse the course of the state, eventually bringing people back, pushing up home values and making Illinois a competitive place again.

The bottom line is, Illinois needs to adapt to succeed. Sears shows what happens when you don’t.

Read more about Illinois’s fiscal crisis and the progressive tax:

 

Appendix 1

Appendix 2

Appendix 3

 

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Andrew Szakmary

Comparing a corporation with a government is a flawed analogy. Corporations have no taxing power, but state governments do to a considerable extent because it is difficult for residents to leave their jobs and lives behind and move elsewhere at the drop of a hat. It is especially difficult when much of those taxes are levied on property and cause its market value to decline.

NiteCat

The one thing I fail to see in all the articles written about the demise of Sears is a simple fact. Ed Lambert is a REIT guy, not a retailer. He always thought HIS future was in the value of the real estate/leases Sears owned, never the retail division. He didn’t care about retail being taken over by the likes of Walmart & Amazon, land values was/is his god. Well, the one thing he didn’t envision is the continuously collapsing/flat IL real estate market due to the failure of our GA and Governors to reign in taxes, spending & the… Read more »

debtsor

Lambert failed to see how the collapse in retail generally would affect the value of his land and leases, especially so in Illinois where Sears used to be King. The Golf Mills Sears lease (in Niles, IL) has a value of zero, probably less than zero, as the store remains empty two years later, with no interested tenants. Same goes for many other former Sears locations. The value of Sears was in the catalog. It was the original amazon. I worked at a Sears call center years ago and the phones rang non-stop with rural and small town buyers who… Read more »

Douglas

Sears can’t extort you by threatening to harm you if you don’t pay up like government does. Sears can’t force you to shop there, government forces you to pay for services you don’t even use (theft and extortion).

The free market is voluntary, where government isn’t.

Erik

We can only hope that state gov follows Sears lead and closes massive numbers of facilities.

Rick

Another analogy with Sears…. I was working in IT at Sears from1985 through 1994 when they sold Sears catalog business. I developed their 800 number calling centers that took catalog orders and employed approx 30,000 full time telephone operators taking orders, pre Internet. With gross order demand of 7 billion a year. At that time Sears had absolutely everything it needed to be the first Amazon, it had credit systems, it had distribution, it had massive ordering capabilities and most importantly 150 years of trust in that catalog. In 1993 they foolishly sold off the venerable catalog business, oops, then… Read more »

Illinois Entrepreneur

Great story! It would have really been something if Sears could have seen what Amazon became, and how they did it. But even in the late 90’s and early aughts, many people did not believe that Amazon would make it. They didn’t think the business model was viable. I don’t think that makes the Sears CEO an “idiot,” but I think it shows you how much of a visionary Jeff Bezos really is. This is why we pay CEOs the money that we do. Good ones are really hard to find, and most of them will just form their own… Read more »

nixit

You probably crossed paths with a few co-workers of mine who stuck around Sears long enough to convert mainframe to ERP then bail for greener pastures.

Rick

I was on the ACES team Advanced Catalog Entry System. At Sears you could buy a woman’s dress, a drill press, your kid a toy and a refrigerator on the same trip! Some marketing women at Sears at that time wanted it to be all about apparel, “the softer side of Sears” you remember. That one campaign destroyed the company combined with starving out catalog. They didn’t even sell catalog, the just starved it.

Tom Paine's Ghost

Illinois Bankruptcy, just like Sears bankruptcy, is inevitible. The Illinois Democrats (and their lapdog RINO Republicans) can’t bamboozle the arithmetic. The thoroughly corrupt Democrats certainly know this and are simply trying to get as much as the can for themselves while they still can. Decades ago Illinois politicians stopped caring about the taxpayers or the citizens. They’ve been out for themselves ever since. Virtually everything about Illinois politics is a politician enrichment program an incumbent protection racket and a voter suppression scam. Only at the very end moments before total financial failure will the foolish and mostly apathetic Illinois voters… Read more »

Denise

A good analogy.

Tom OConnor

When I started to read this article I was a bit dismissive of the analogy, Illinois is the Sears of the United States. Sears has lost business because of a poor mix of products, outdated stores, and the lure of new(better) shopping alternatives, Walmart, Costco, Target, Amazon. And also maybe a better perceived value for the price. So this article from Wirepoints makes the case that just like the old Sears, shoppers have now found a better source for their dollars. Thus Walmart becomes Indiana, Costco is Wisconsin, Target = Tennessee, and Amazon = Florida(of course). The shoppers vote with… Read more »

nixit

Remember when Dodge resurrected the Dart in 2012, only to discontinue it in 2016? Imagine, in 2015, after a few years of disappointing sales, FCA President Sergio Marchionne approaches his executive team for their plan to save the poor Dart. The team comes back with the same exact car with the same warranty and same financial incentives, but increase MSRP by $3,000. That’s Illinois.

MikeH

I firmly believe that it’s been the embrace of postmodernism that has led to the political climate becoming what it is today. When you can convince enough people that everything is relative, you can sell them anything as long as it gives them that warm, fuzzy feeling.

Mike Williams

Once one more generation is 6 feet under, will anyone even remember SEARS. Will anyone remember Illinois?

Poor Taxpayer

The best day of your life is the day you move out of Illinois.
There is no hope, DOA, a goner.
Let the cops, teachers and firemen pay all the pension taxes.
Do not be the last man to move.
The race is on to get out of this hell hole.
HIGH TAXES, LOW SERVICES AND some of the worst weather in the US.
You and your family deserve much better.