PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

State Spotlight: Illinois Governor and Legislators Slamming Small Business and State’s Economy

By at 16 June, 2019, 8:56 am

by Raymond J. Keating-

Small Business Policy Index 2019: Illinois 35th among the 50 states.

SBE Council’s “Small Business Policy Index 2019” ranks the 50 states according to 62 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements.

Small Business Tax Index 2019: Illinois ranked 37th among the 50 states.

SBE Council’s “Small Business Tax Index 2019” is included in the Policy Index report, ranking the states according to a wide array of tax measures, including income, capital gains, property, death, unemployment, and various consumption-based taxes like state gas and diesel levies.

In terms of its public policy climate for entrepreneurship, small business and investment, Illinois is not so friendly. Unfortunately, Gov. J.B. Pritzker and state legislators are looking to make things far worse.

According to SBE Council’s “Small Business Policy Index 2019: Ranking the States on Policy Measures and Costs Impacting Entrepreneurship and Small Business Growth,” which ranks the 50 states according to 62 different policy measures, including assorted tax, regulatory and government spending measures, Illinois ranked an non-competitive 35th among the 50 states. For good measure, on the “Small Business Tax Index 2019,” which is a subset of the larger Policy Index, whereby the states are ranked on tax measures, Illinois came in at number 37 among the 50 states.

Among the negatives for Illinois are very high corporate income and capital gains taxes; high property taxes; a fairly high diesel tax; a high level of state and local government debt; a state death tax; a high minimum wage; and Illinois is not a right-to-work state.

If you think that state lawmakers would be concerned about the state’s business environment, you’d be wrong. And if you thought that lawmakers would be worried about why Illinois is exporting so many people to other states – for example, Illinois lost 761,837 net population to other states in terms of domestic migration from 2010 to 2018, only trailing New York’s loss of 1.2 million  – again, you’d be wrong.

Instead, the government and state legislators are looking to create a more hostile environment for entrepreneurs, investors and taxpayers in general.

Specifically, the current state individual income and capital gains tax rate is a flat 4.95 percent. Legislation passed and signed by the governor, if voters in November 2020 approve repealing the state’s constitutional flat tax, would add three more tax rates – 7.75 percent, 7.85 percent and a top rate of 7.99 percent. By the way, there’s an added tax on S-Corps in existence, which would then bring the top rate on those small businesses to 9.49 percent.

In addition, the corporate income and capital gains tax rate would be increased from 7 percent to 7.99 percent. However, again, there’s an additional 2.5 percent tax on corporations, so the total top tax rate would increase from 9.5 percent to 10.49 percent.

If voters go along with this plan, Illinois would drop from its current poor position of 35th on the “Small Business Policy Index” to an even more hostile 39th (without actions in other states), and from 37th on the “Small Business Tax Index” to 41st.

Oh yes, and by the way, state legislators also voted to give themselves $1,600 pay raises.

One state legislator, State Sen. Toi Hutchinson, D-Olympia Fields, was quoted saying, “Our problems are way too big to think small.” Senator Fields need not worry – if the increase in income tax rates get approved at the ballot box, Illinois’ problems will get much bigger.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

 

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