I’m embracing the season early this year as I’m reading through recent state budget proposals coming out of the Illinois Senate, which seem to follow the Mardi Gras mantra of letting the good times roll.
Except that as is plain to anyone that lives in the state, runs a business in the state, is seeking employment in the state, owns a home in the state, operates a non-profit in the state, or runs a school district, there are no financial good times to roll.
Last week, I wrote a column stating that more work was needed on this “Grand Bargain.” It is a promising start and could lay out the bones of a compromise. I sincerely hope that the Senate continues to negotiate in “good faith to make our state more competitive,” and to create the environment for businesses to grow.
One proposal from Sen. Toi Hutchinson that does not seem to accomplish this goal is Amendment 1 to SB09, the omnibus tax bill which is officially part of the budget proposal. This modification to the bill creates a payroll tax, a potential first for Illinois. Businesses would be required to pay the tax, “for the privilege of doing business in the State.”
In nuts and bolts, the “business opportunity tax,” would create five tax brackets based on payroll. If the payroll is less than $100,000 the tax would be $225, but it scales up to $15,000 for payrolls $1,500,000 or more.
In addition to the payroll tax, there is a proposal for a new tax on services. Dry cleaners, laundromats, storage companies, landscapers, car repair services, personal property tax maintenance, and amusement services would all receive a new tax.
Taken together these proposals are heavily weighted against small businesses and high labor sectors, having a regressive effect. They will not grow our economy and will likely push more people to vote with their feet, joining the half that already want to leave.
That said there are pro-business reform proposals in the still nascent budget compromise. An end to the business franchise tax is one such positive example.
However, taken together the current state of the budget negotiation is too focused on shaking down Illinois business instead of creating the opportunity for growth. Laissez les bons temps rouler.