Take a deep breath: We support a proposal put forth by Illinois Speaker of the House Michael Madigan.
Last week, Madigan proposed cutting the state’s corporate income tax in half as a way to improve Illinois’ business climate.
The legislation would cut the rate from 7 percent to 3.5 percent, retroactive to Jan. 1. Businesses also pay a 2.5 percent personal-property replacement tax. So under Madigan’s proposal, the total corporate tax would be 6 percent.
It’s no secret that Illinois is an unfriendly state for businesses. It has the fourth-highest corporate tax rate in the world. It has the fourth-highest workers’ compensation costs in the U.S. It has the country’s second-highest property taxes. In part because of this, Moody’s Analytics projects that Illinois will be dead last of the 50 states in job growth this year.
That’s No. 50 in a 50-horse race.
Something’s got to give if Illinois hopes to be remotely competitive in keeping jobs here and attracting new ones.
That’s why we support Madigan’s proposal. We also agree, however, with state Rep. David McSweeney when he said that the speaker’s legislation should be just the start.
“I strongly support Speaker Madigan’s legislation that would cut the all-in corporate income tax rate from 9 percent to 6 percent,” McSweeney wrote in an email. “I also support cutting individual tax rates so that small businesses and families can benefit. Cutting tax rates will help encourage much-needed economic growth and job creation.”
In 2011, the General Assembly increased the personal income taxes paid by this state’s workforce by 67 percent, from 3 percent of each person’s gross salary to 5 percent. The majority of that new revenue was to be used to pay down the state’s debt. Sadly, that hasn’t happened. Illinois ended 2013 with more than $7 billion in unpaid bills. Instead, the additional revenue has gone almost exclusively to pensions.
The income tax increase was supposed to begin sunsetting at the end of this year, when it was to decline to 3.75 percent. In 2025, the rate was scheduled to fall to 3.25 percent. But because Illinois continues to spend more than it takes in, top lawmakers behind the scenes are talking about either making the income tax increase permanent or switching to a graduated income tax, in which higher earners pay a larger percentage. Both scenarios would be bad for Illinois.
Illinois’ leaders need to understand they can’t continue to tax more and spend more if we are to prosper.