Two weeks ago, I noted that our cross-border friends in Illinois had an economic mess on their hands. Unemployment's high and the budget is out of whack. But tax increases rather than budget cuts constitute the fiscal front line in Illinois: taxes on Internet sales, and tax hikes on income, on wealth-creating enterprises, and on enterprisers that make Illinois prosper.

The result? A schizophrenic tax and tax-break policy that has business looking for the exits. The latest: Sears.

Sears Holdings Corp.'s confirmation Monday that it is considering leaving Illinois could push the fiscally crippled state to dole out incentives to another major company.

In 1989, Sears leveraged the possibility of moving to North Carolina to earn tax breaks that led it to leave Sears Tower (now Willis Tower) in the Loop for its Hoffman Estates campus, said Hoffman Estates Mayor William McLeod. […] The threat looms large: Sears, a 125-year-old mail-order pioneer and retail institution, is the Chicago area's fourth-largest publicly traded company by revenue ($43.3 billion in fiscal 2010). The parent of Sears and Kmart employs 280,000 in North America, including 6,200 at its 200-acre Prairie Stone campus.

Tax-credit mania!

The article continues (emphasis added):

The news follows Illinois' $7 million tax credit to keep U.S. Cellular Corp., a $19 million tax break to Continental Tire, $65 million in tax breaks to keep Navistar and $100 million in tax incentives to retain Motorola Mobility's Libertyville headquarters. Gov. [Pat] Quinn also scrambled to assure Caterpillar that Illinois is a business-friendly state.

One of the best ways to assure businesses that your state is "business-friendly" is to establish low, stable tax rates that don't punish hard work or pick winners and losers. Tax increases aren't the answer, and the list of states to which Sears might move — Georgia, New Jersey, North Carolina, South Carolina, Tennessee, and Texas — are mostly the usual, business-friendly suspects, some of whom may literally be laughing at Illinois' economic policies all the way to the bank. For example, Illinois now applies a 5-percent income tax rate (formerly 3 percent) against its residents; Tennessee and Texas don't even have an income tax. Under those conditions, where would you rather live and work?

But, Missourians, do note: Our income tax rate settles in at 6 percent. Missouri's leaders haven't written off fiscal discipline entirely, but the state's income tax probably ought to be revisited sometime soon. Food for thought.