Illinois’ legislature is currently considering an alternative to the initial taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. increase proposed last week. Instead of pushing for a 75% increase in the personal income tax and a 49% increase in the corporate income tax, this proposal would raise the individual income taxAn individual income tax (or personal income tax) is levied on the wages, salaries, investments, or other forms of income an individual or household earns. The U.S. imposes a progressive income tax where rates increase with income. The Federal Income Tax was established in 1913 with the ratification of the 16th Amendment. Though barely 100 years old, individual income taxes are the largest source of tax revenue in the U.S. rate to 5% and the corporate rate 9.5%. While this proposal is more modest than the first, it still hurts the competitiveness of Illinois when it comes to maintaining and attracting new business.
If this passes, Illinois will have the fourth-highest corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. in the country behind only Minnesota and Pennsylvania. The corporate income tax has been shown to be among the most damaging taxes in terms of economic growth.
The individual income tax is often overlooked as a factor in business decisions. This is unfortunate because a large amount of business income is actually filed through the individual income tax. In raising the rate to 5%, Illinois would have the one of the highest flat individual income tax in the country.
In solving their budget problems, Illinois needs to do something that it has not done in a long time and that is look to the future. The governor and the legislature need to look past the next day, week and month and consider the long-term effect of their policy decisions.
Share