SPRINGFIELD – Governor JB Pritzker’s proposed spending plan of $ 41.6 billion for the upcoming fiscal year is based in part on the termination of nine corporate tax incentives in order to receive an estimated $ 932 million in government revenue.
However, Pritzker’s proposal to close the business loopholes he described as “unaffordable” would require action by the Illinois General Assembly.
“This is going to be one of the most challenging budgets this government has ever drawn up, but I know there are willing partners in the General Assembly,” said Pritzker during his pre-recorded budget address on Wednesday, adding that members of the General Assembly had their ideas have included. “Like cutting corporate loopholes that are forcing the middle class to pay more.”
Republican lawmakers rejected the proposal as a “tax hike” and corporate interest groups criticized the plan as being unfair to retailers.
“At a time when businesses across the state are reaching for straws to stay afloat, Governor Pritzker is now proposing a tax hike for everyone as there are just loopholes,” said Western Minority Leader Jim Durkin Springs.
Two of the tax deductions eliminated in Pritzker’s Plan were passed in 2017 under the Federal Tax Reduction and Employment Act, including the bonus depreciation allowance for certain properties, according to senior household officials who provided background information prior to the address.
The governor’s budget plan is to roll back this bonus write-off, which would have allowed business owners of certain depreciable properties to claim up to 100% of the write-off as a tax deduction.
This rollback would receive $ 214 million of the total of $ 932 million proposed by Pritzker’s tax withholding closings.
The second so-called corporate void, created under the Tax Cut and Employment Act and proposed by Pritzker, is a deduction for dividends or shareholder profits from multinational corporations with overseas subsidiaries.
Pritzker budget officials said this change to the Tax Cut and Employment Act allows large multinational corporations with overseas subsidiaries to deduct the dividends their overseas subsidiary pays to a parent company at a lower tax rate than dividends paid to a domestic subsidiary.
Pritzker’s proposed budget would end the lower tax rates on foreign-source dividends and equate them with the rates on domestic-source dividends, preserving $ 107 million in revenue.
Durkin also condemned Pritzker for adding the Invest in Kids Scholarship Tax Credit Program – a scholarship program for low-income students attending private or parish schools – to his list of proposed tax credit cuts.
“(Pritzker) is now launching a program that provides scholarships to 3,800 low-income Illinois students and families who are struggling to get by on an average household income of $ 35,000 to get an education and help them find one help school if they want their child to be successful. Basically the governor does the program with his household address today, “Durkin said in a press conference after Pritzker’s speech.
Pritzker’s plan would cut the tax credit that individuals and businesses receive for donating to the Invest in Kids program from 75% to 40%.
Pritzker’s plan would also cap deductions companies can claim as net operating losses for the next three years to $ 100,000 per year, and cap the retailer’s monthly rebate to $ 1,000 per month, which would allow retailers to be reimbursed $ 1.75 per month to retail businesses Sales tax they charge.
The cap on net operating loss would save approximately $ 314 million while capping the retail discount would save $ 73 million.
Rob Karr, president and CEO of the Illinois Retail Merchants Association, also criticized Pritzker’s proposal as being detrimental to the state’s small retail businesses.
“While the governor claims his focus is on rebuilding the state economy, it is counterintuitive that his first step is to increase business costs by removing the retail discount that shopkeepers only partially manage and collect the sales tax is reimbursed on behalf of the state, “Karr said in a press release.
Illinois Comptroller Susana Mendoza said in an interview that eliminating corporate tax credits and withholding tax is one option among a number of poor budget balancing options.
“There’s no such thing as a painless cut. Republicans have to choose whether to continue their tax credits or to wreak havoc on the Illinois communities of vulnerable people who are already attached to one, so you know neither option is good,” she said.
Senate President Don Harmon, a Democrat from Oak Park, said in a press conference following the address that a review of some of the state’s tax incentive programs was overdue, adding that it was worthwhile for the state to “see what works and get rid of what.” Not.” . “
“Our first priority in tax incentives must be jobs for hardworking Illinois people. I think it’s a fair question to ask, ‘What are hardworking Illinois taxpayers getting in return for these corporate tax breaks?'” Harmon said.