by Ben VanMetre
Senior Budget and Tax Policy Analyst
Illinois’ poor public
policies continue to hammer the state’s business climate. This week the Tax Foundation
released its 2013 State Business Tax Climate Index, confirming the state’s worsening position. Illinois
dropped a full 13 places, to 29th, from 16th just since
2011. Illinois now ranks worse
than most of its neighbors.
The Tax Foundation ranks
states based on 118 different variables that fit into five broad categories:
corporate tax, individual income tax, sales tax, unemployment insurance and
property tax. Here’s how Illinois ranks relative to its neighboring states:
Illinois businesses and
consumers are suffering – operating in a state that ranks 47th in
corporate taxes, 34th in sales taxes, 43rd in
unemployment insurance and 44th in property taxes.
The only category propping
up Illinois’ rank is the individual income tax, which accounts for a third of
the total index score. Illinois, Indiana and Michigan score well in this
category because of their flat rate income tax structure.
Unfortunately, Gov. Quinn
is looking cut the legs out from Illinois’ only positive category. He wants to end Illinois’ flat tax regime and introduce a progressive income tax.
progressive income tax would further destroy Illinois’ entrepreneurial activity and would have detrimental effects on the state’s
business climate. The tax foundation correctly argues that a progressive income
tax discourages entry into self-employment, reduces investment and hiring and
provides a disincentive for individuals to work.
Instead of worsening
Illinois’ business climate, Gov. Quinn should push for Illinois to join the seven
states without an individual income tax.
States without an
individual income tax are the highest ranking states in this category. More
importantly, these states are among the highest ranking states in the entire
business climate index.
The point is this: states
that embrace neutrality in their tax code and allow individuals and businesses
to keep more of their income are simply more competitive than states with discriminatory tax structures.
Instead of flirting with
the idea of destroying Illinois’ business climate with a progressive income
tax, lawmakers should make Illinois a better place to live and do business by
removing the individual income tax altogether.