A new ranking brings Illinois corporate tax rates to the top. Still, Governor JB Pritzker plans to pull $ 900 million more from businesses after failing to stop COVID-19 small business tax credits of up to $ 1 billion.
The Illinois corporate tax rate is among the six highest in the United States. However, the more problematic measure could be that it far outperforms most of the neighboring states, according to a new survey by the Tax Foundation.
In addition, Governor JB Pritzker is looking for ways to close “loopholes” in corporate income tax. His budget forecast for fiscal year 2022, published on February 9, called for $ 900 million from this source. He didn’t offer any details.
Pritzker failed to halt a $ 500-1 billion tax credit on COVID-19 for the state’s small businesses during the lame ducks legislative session. He had previously vowed to tackle this tax break again during the upcoming legislative term, but made no statement on Feb. 9 about how his new plan to seek $ 900 million by closing loopholes affected it Efforts would impact.
Indiana’s corporate rate is 5.25% versus Illinois at 9.5%, and Indiana plans to cut the rate again to 4.9% on July 1.
Iowa is the only neighboring state that is slightly higher than Illinois at 9.8%.
Missouri has one of the lowest corporate rates in the country at 4%
These tax rates aren’t just a factor when businesses try to settle in or move away from Illinois. They also affect the companies that stay in Illinois.
“While economists have drawn mixed conclusions about the extent of the negative effects of corporate tax, there has been an overwhelming consensus for at least 35 years on the negative relationship between corporate tax, capital formation and economic output,” said the Tax Foundation. “Reducing the tax burden on companies increases capital formation, productivity and the willingness to innovate, which in turn drives economic growth.”
Economic growth means jobs, which is particularly damaging to Illinois during the COVID-19 economic downturn. Illinois lost 423,300 jobs in 2020, a historic decline that means nearly 7% of its workforce has disappeared.
Corporate taxes have a high cost compared to tax revenue. On average in the country, corporate taxes accounted for 2.27% of general government revenue in 2018.
But Illinois is stubbornly sticking to high corporate taxes. From 2017 to 2020, Illinois fell from 26th to 36th in the Tax Foundation’s ranking for the corporate income tax component of its State Business Tax Climate Index. Indiana moved from 23rd to 11th place and Missouri stayed in 5th place, with the exception of a drop to 6th place in 2020.
High taxes and a lack of opportunities drive the Illinois people away. The state lost 253,015 inhabitants from 2010 to 2020 – three times as many as any other state.
This link between corporate taxes and employment growth is the reason why neighboring countries have lowered or kept corporate tax rates low. The income they generate is not worth the impact on producers or workers.
So if Pritzker and the Illinois Democrats want to close “tax loopholes” on corporate taxes and then propose that small businesses – the sources of 61% of Illinois jobs – or $ 900 million from corporations – get $ 500 to $ 1 billion received, a threat to workers in Illinois is emerging at a time when they are already affected by the pandemic and associated government mandates.