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Indiana drops corporate tax rate as Illinois considers increasing it

JULY 17, 2020

Illinois Gov. J.B. Pritzker’s ‘fair tax’ would raise Illinois business taxes to the highest in the nation as neighboring Indiana cuts taxes to draw businesses across the border.

Other Midwest states are working to be more business friendly, but Illinois is trying to tax businesses more.

On July 1, Indiana reduced the corporate tax rate from 5.5% to 5.25%. It has been dropping every July since 2012, when it was at 8.5%. Next year, the corporate tax rate will decrease again to 4.9%.

Illinois’ corporate tax rate currently is 9.5%, but will increase to 10.49% if state voters are persuaded by the $56.5 millionworth of “fair tax” messages for which Gov. J.B. Pritzker is paying. Voting to remove Illinois’ flat tax protections will give Illinois a corporate tax rate that is the highest in the nation and more than twice as high as neighboring Indiana.

Pritzker's progressive tax could give Illinois highest corporate income tax rate in U.S.

Small businesses would fare even worse. Tax rates on more than 100,000 Illinois small businesses could jump as much as 47%, from 6.45% to 9.49% – also nearly twice as high as Indiana’s corporate income tax. That is bad for Illinois jobs, because small businesses are responsible for about 60% of the state’s job creation and have already taken the brunt of the COVID-19 economic harm.

Imposing progressive taxes would drop Illinois from 36th to 48th in the nation for its business tax climate, a Tax Foundation analysis found in 2019.

Thousands of Illinois small businesses are not expected to recover from the COVID-19 restrictions and economic downturn. Even big business is suffering, with Chicago-based United Airlines expected to lay off nearly half of its employees. By adding on a massive tax increase, more businesses will close or cut workers.

Many will simply pack up for a state that encourages their growth rather than punishes it.

“My personal opinion is that the governor is making the wrong judgment because you’re going to do a progressive tax and start pushing people out of Illinois,” said Antonio Cavazos, who owns a sangria manufacturing business with his wife in Oak Lawn. “We’ve considered [moving]. And looking at excise tax, Indiana and Wisconsin are a heck of a lot cheaper than Illinois.”

Illinoisans will vote on Pritzker’s progressive income tax measure Nov. 3.

Chicago Tribune Editorial: Property tax failure another reason to vote against the tax referendum

July is sweat-and-fret month for many taxpayers in Illinois: How will households slammed by job disruptions and a public health contagion now pay their property tax bills? Those local taxes gouge virtually everyone: Employers and homeowners — or whoever services their mortgages — make most of these payments to the county treasurer; renters indirectly pay property taxes in rent to the landlord.

And after the pending property tax deadline, another threat looms. Voters this fall will decide whether to let their politicians raise state income taxes or instead force them to clamp down on state spending that just grows and grows.

What we call the proposed “Pritzker Tax” — named for Gov. J.B. Pritzker, who calls it a “fair tax” — would replace Illinois’ constitutionally protected flat-rate income tax with graduated rates. The change would make it easier for politicians in Springfield to raise income taxes. Currently, a tax hike requires more heft from politicians because it affects every taxpayer. Tinkering with a graduated structure is a softer lift.

Oh! We’re just raising this itty-bitty rate on this itty-bitty group of people. Those itty-bitties add up.

As a voter, you’re supposed to trust Illinois politicians. Trust that they’ll give you property tax relief. Trust that they’ll start passing smarter budgets. Trust that they’ll undo some of their past mistakes. Oh, and trust that they’ll only slap this top itty-bitty 3% of taxpayers with higher tax rates — as if higher earners are to blame for this state’s fiscal mess. You’ll see ads urging you to trust the pols, including the most influential pol, House Speaker Michael Madigan, and vote yes on the Pritzker Tax amendment. Pritzker dumped more than $50 million of his own money into the campaign to get it passed.

Which brings us right back to this latest round of property tax bills. The refusal of Democratic lawmakers to confront Illinois’ runaway property taxes speaks volumes about whether you should trust Springfield’s promises about the Pritzker Tax.

‘Trust us, we’ll fix property taxes.

Recall how, in the spring of 2019, the governor placated some Democratic legislators nervous about putting his Pritzker Tax amendment on the November 2020 ballot. How could they justify voting to enable even higher taxation?

Pritzker tossed them a bone: He’d offset a risky income tax grab with property tax reform. Here’s what the governor said on Aug. 2, 2019, when he announced formation of a legislative task force to help Illinois “reduce local reliance on property taxes”:

“Together, we’ll ensure our children receive the quality education they deserve even while we provide more property tax relief for our homeowners and make our system more fair for everyone.”

We wrote that because of that pledge, Pritzker would have to extract some action on property taxes from his task force and the legislature — even if the General Assembly merely sprayed eyewash that didn’t actually lower property tax bills. We expected, say, a nobly titled Illinois Property Taxpayers Relief Act. Maybe an appearance of reform would persuade voters that Democrats were working feverishly to lower local tax bills.

But nothing happened. The task force flopped. Democratic legislators paid lip service. Worse, falling home values throughout the Chicago area due in part to eye-popping property taxes have created a money-losing cycle that is pushing residents out of Illinois.

Democrats could blame the pandemic for the failure to reform, but that would be dishonest. They had no property tax plan before the contagion hit, and they developed no fix during their five session months.

Besides, Illinois property taxes have been studied interminably. Reform is a question of willingness, not of finding time. Madigan’s command staff could have fixed the property tax system decades ago — if that’s what Madigan wanted.

‘Trust us, we need more income tax’

The promise of property tax reform has always smacked of a shell game. Trim one tax while increasing another. The truth is that if state government, local governments and school districts don’t rein in their spending, taxpayers will get no net relief. Taxpayers will pay the same total amount of their income in taxes — less here but more there.

Yet cutting the cost of government isn’t part of the Pritzker Tax agenda. The Democrats offer no pension reform, no big cuts to other cost drivers, not even state furlough days or other economizing on personnel costs during the pandemic.

Instead opportunistic Democrats have adopted the pandemic as, yes, one more excuse for raising more income tax revenue. Look at all the money we have to spend on the coronavirus!

This stubborn refusal to aggressively enlist Illinois’ public sector in a statewide sacrifice attests to the clout of the public employee unions whose money and muscle keep Democrats in control here.

Pritzker, Madigan & Co. protect spending on union workers in state but also local governments. Given the pension crisis Illinois politicians have nurtured, that protection racket has exorbitant costs to taxpayers. The need to meet enormous and rising personnel costs is the real if unspoken rationale for the Pritzker Tax.

‘Trust us, we’ll fix Illinois’

That’s also why the promise of property tax reform relied on taxpayers’ gullibility. Maybe Pritzker himself was gullible in thinking he could make it happen.

But Madigan routinely passes the annual budget he wants. The governors are short-timers. The come and go. By contrast, 2020 is Madigan’s 50th year in Springfield.

So even if Joe Taxpayer wants to believe and trust in Pritzker, not even halfway through his first term, that taxpayer must contend with the levers that actually decide on spending in Springfield. That’s Madigan.

We’ll have more to say about these and many other broken promises to taxpayers — Illinois politicians’ fractured fairy tales — as the tax vote approaches.

So, do you trust Michael Madigan?

Whether because of his inexperience at government or just his generally affable manner, the governor may have already undercut his own push for the Pritzker Tax. He won support for graduated tax rates by voicing a promise of property tax reform. Didn’t happen.

In his first year, he signed a budget that increased spending both on the general revenue side and through a massive $45 billion infrastructure bill. There were no spending cuts, no efficiencies, no “shared sacrifice” from unionized employees. Only higher taxes and fees.

When the COVID pandemic hit, Illinois was, of course, ill-equipped to handle any sort of emergency. That led to Senate President Don Harmon’s infamous “ask” of Congress for a bailout that included pension help.

Is this the fiscally prudent, trustworthy state government deserving of more money through an income tax hike? Rhetorical question.

Voters should focus on this: The Democrats who run Illinois haven’t done the hard work of restructuring how this state collects, and spends, all the money it already gets from taxpayers.

And they won’t do that hard work unless voters reject the Pritzker Tax. It is one chance for voters to hold the upper hand. Remember that as you pay your property taxes. Another promise, broken.

Editorials reflect the opinion of the Chicago Tribune Editorial Board.

Significant tax increases are starting to hit nationwide

Major Tax Increases Are About To Slam America As Cities & States Want You To Pay For COVID Fallout

Authored by Isaac Davis via Waking Times,

Just prior to the global Coronavirus outbreak, serious signs of an emerging financial crisis began to emerge. As people were beginning to realize that yet another central bank engineered ‘bust’ was coming down on us, we were thrown into lockdown, shuttering millions of businesses and sending millions of people to the unemployment line.

Now, a few months later, we are starting to realize just how deep the economic fallout will be, and Americans are scrambling to adjust their lifestyles to a totally new world order. At the top of the food chain, though, is government. City, county, state and federal.

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