I would call that a warning. And that’s the context of this huge $ 932 million tax hike for corporate government. JB Pritzker is pushing within his proposed budget for 2022.
Pritzker calls the proposal “closing business gaps”. I think that’s true, at least in the sense that any tax break I don’t get has to be someone else’s undeserved void. However, the proposal comes precisely at a time when population and employment are declining not only across the country but also in the metropolitan area, and at a time when the state is refusing to face its ever-increasing pension debt. Not to mention Chicago’s wave of murders and car thefts. Or what Cook County Assessor Fritz Kaegi is up to.
Outside experts I spoke to said pretty much the same thing. Pritzker’s proposal, adopted after its vaunted tiered income tax change was defeated last November, is just another straw on the back of an already swaying camel.
“My very strong recommendation to the governor is to submit these (tax) changes,” says Dennis Donovan, the “D” of WDG Consulting, a New Jersey-based corporate office. “Illinois has suffered from a negative business climate for years. . . I think this is going to make some companies think twice about moving there. “In fact, one of them is his customer,” Donovan said, referring to a manufacturer Illinois was looking for an expansion. Well, “I think they’re going to land in southern Wisconsin.”
The tax hike only adds to the “ticking (fiscal) bomb” equivalent to Illinois’ $ 144 billion in unfunded pension obligation, says Jack Boyd, another moving advisor, Boyd Co.s. Taken together, his clients, including some who are now in Illinois, are increasingly looking to places like Texas, he says.
To do Pritzker justice, Illinois isn’t the only state shifting its tax structure, at least in part, in its proposed direction. For example, according to the Tax Foundation, a Washington research group that is fairly conservative but is also frequently cited in business circles, only 16 states grant the full accelerated depreciation that is now included in federal tax legislation. The change proposed by Pritzker is valued at $ 214 million per year.
On the flip side, the biggest change the governor wants – capping corporate loss deductions to $ 100,000 a year for three years worth $ 314 million a year – would absolutely make Illinois an outlier compared to other states, says Carol Portman, President of the Taxpayers Federation of Illinois. This unpredictability is what really irritates business, she says. Additionally, according to the Tax Foundation, Pritzker’s changes would reduce Illinois’ overall corporate tax climate rating from a weak 36th of the 50 states to an even sadder 39th.
In some ways, what is most troubling about all of this is the aura of repayment that Pritzker and his aides seem to have embraced. The message seems to be: hey business, you beat my tiered tax change so you have to pay now.
Pritkzer should know better. The graduated tax would have been paid by individuals only. His proposed gap fillings – including a couple he signed for himself a few years ago – will not affect the rich, but the companies that create and relocate jobs.
Perhaps this is just a bargaining position to force one’s enemies to the negotiating table. Maybe the governor will cut his bells and whistles and find a better way. Hopefully. What’s on the table now is just not very smart.