Social mobility, also called upward mobility, is a defining feature of American life. Our history is filled with rags-to-riches stories—John D. Rockefeller, Oprah Winfrey, Dolly Parton, and Larry Ellison, to name a few—and millions more have reached the middle class despite challenging childhoods. The opportunity to make a better life is what attracts people from all over the world to the United States, but not all states provide the same opportunity. According to a recent report published by the Archbridge Institute, Illinois is one state that could make it easier for people to move up in society by reforming its economic policies.

The Archbridge Institute gives each state a social mobility score that is composed of data from four areas ; entrepreneurship and economic growth, institutions and the rule of law, education and skills development, and social capital. Joshua Bandoch and Justin Callais, the authors of the Illinois report, note that Illinois’s social mobility score ranks 40 ^th among the states and is the lowest in the Midwest (see map below).

Illinois scores particularly poorly in the first two areas—entrepreneurship and economic growth, and institutions and the rule of law.

The data used for the entrepreneurship and economic growth area include measures of regulation (e.g., occupational licensing, minimum wage laws, land-use regulations), taxes, and measures of business activity (e.g., growth in total firms, patents per 1,000 people). Illinois ranks 44 ^th in this area overall, and its tax rank is especially low at 46. According to the Tax Foundation, Illinois’s state and local tax burden is 12.9% of its share of national output. This is the highest tax burden in the Midwest and the seventh highest in the country.

Taxes are not Illinois’s only problem. It also imposes a lot of regulations on entrepreneurs. Among the 50 states it has the fourth most restrictions in its administrative code. Research shows these regulations reduce business starts and economic growth . As the report notes, Illinois has lost thousands of businesses in recent years, including big-name firms such as Citadel, Boeing, and Tyson Foods. Big businesses generate a lot of economic activity, including thousands of good-paying jobs. When they leave, the smaller businesses that relied on them—such as suppliers and nearby restaurants that served employees—also suffer.

Illinois also suffers from too much unproductive entrepreneurship. In another recent study , authors Justin Callias, Peter T. Calcagno, and Gary A. Wagner create an entrepreneurship index for 381 metropolitan areas. The index measures a metro area’s productive entrepreneurship, which is entrepreneurial activity focused on providing goods and services to consumers, and its unproductive entrepreneurship, which is entrepreneurial activity focused on lobbying government for favors such as tax breaks and regulations that harm competition. The two values are combined to create a net productive entrepreneurship (NPE) index. A metro area with a positive index value has more productive than unproductive entrepreneurship while a negative value means the opposite.

The authors show that a higher NPE value is associated with positive economic outcomes such as more employment and higher per capita incomes (see figure below). They find that one-point increase in the NPE index is associated with an average increase of $686 in a metro area’s per capita income.

Chicago is by far the biggest metro area in Illinois, and it has the sixth worst entrepreneurship value among metro areas with 1 million people or more. Chicago’s low value impacts the entire state’s entrepreneurship value, which also ranks sixth worst among states.

Cities are hubs of economic activity and big cities can drive economic outcomes for entire states. This is especially true in a state like Illinois with only one major metro area. Chicago’s low level of productive entrepreneurship focused on customers and high level of unproductive entrepreneurship focused on lobbying makes the entire state poorer.

Illinois has a lot of policies that discourage economic activity, but the good news is that policies can be changed. The report offers several recommendations that if implemented would improve Illinois’s entrepreneurship environment and increase social mobility.

Fist, Illinois policymakers should reduce regulation. Illinois currently has over 275,000 restrictions and nearly 19 million words in its regulatory texts. Policymakers should set a target of 150,000 restrictions—a nearly 45% cut. They should also activate and use the state’s sunset review process to scrutinize occupational licenses. After review, they should eliminate the licenses that are not improving safety and reduce requirements for others when appropriate. This would make it easier for people to get jobs and support their families.

On the tax front, average property tax rates should be reduced from 1.95% of a home’s value to 0.72%, which is near the middle of the pack among states. Policymakers should also eliminate the state’s gross receipts tax on businesses. Gross receipts taxes distort economic decision making by taxing inputs and prohibiting deductions such as labor costs. If necessary, the gross receipts tax could be replaced by a corporate income tax to maintain a similar level of revenue, though the better move would be to reduce government spending.

Illinois’s economic policies are holding its residents back, but policies can be changed. To foster more social mobility, Illinois should lower its taxes to encourage work and investment and reduce its regulations to make it easier to start and operate a business. If state policymakers fail to act, Illinois will fall further behind its neighbors.