35% of Illinois’ small businesses are closed a year into COVID-19 restrictions

More small businesses have closed in Illinois than in any other Midwestern state, except Michigan. Taxing them more as they struggle is the wrong move.

It’s been one year since state-mandated COVID-19 mitigation protocols took effect across the state. Now, a year later, many of Gov. J.B. Pritzker’s mandates remain in place, nearly 500,000 Illinoisans are out of work, Illinois posts the highest unemployment rate in the Midwest and more than 35% of small businesses are closed.

The toll that COVID-19 and state-mandated lockdowns have taken on the economy have been severe, and perhaps no one has felt this pain more than small businesses. Today, 35% of small businesses are closed compared to before the pandemic, more than any other Midwestern state except Michigan. Illinois’ massive decline in the number of small businesses is eighth worst in the nation.

Not all small businesses have been impacted the same. The largest decline has hit the accommodation and food service businesses, where more than 50% remain closed.

Of the industries tracked by Opportunity Insights’ Economic Tracker – a project of Harvard and Brown universities – more Illinois small businesses remain closed than in most other states. In the transportation industry, 30.1% of small businesses remain closed, eighth-most in the nation; among professional and business services small businesses, 23% remain closed, ninth-most in the nation; in the educational and health services industry, 37.6% of small businesses are closed, sixth-most in the nation; 50.7% of small leisure and hospitality businesses are closed, 15th-most in the nation; of food and accommodation small businesses, 50.2% are closed, 16th-most in the nation; and in the retail sector, 33.8% of small businesses are closed, eighth-most in the nation.

Illinois’ small businesses are struggling amidst COVID-19 and state-mandated mitigation protocols. Many are struggling to survive, and more small businesses remain closed in Illinois than in any other midwestern state other than Michigan.  It is vital for the state’s recovery that these small businesses survive and re-open. Illinois’ economic recovery already lags most states, and small businesses are Illinois’ largest job creators, responsible for more than 69% of net job creation.

Unfortunately for these small businesses, rather than pursuing spending reforms, Pritzker is pursuing nine new taxes worth nearly $1 billion, including ones that would hurt job creation efforts. The move was decried by the Illinois Chamber of Commerce and Republicans because Pritzker is not closing unfair “loopholes” as he claimed, but rather trying to take back a deal he made early in his term for key tax incentives and deductions intended to create jobs.

Pritzker is also rumored to be pursuing the cancellation a pandemic recovery tax credit for small businesses that would have taken from $500 million to $1 billion more from them as they struggle to recover.

It is imperative lawmakers work to avoid the harm to businesses and jobs that tax hikes would create. Economists argue against raising taxes during a recession.

Instead, Illinois can improve its finances and continue to provide core services mainly by implementing constitutional pension reform. The Illinois Policy Institute is offering that along with other fiscal fixes that can give overburdened Illinois taxpayers a path to declining debt, lower taxes and more effective state government.

Illinois needs its labor markets to improve so they can create more jobs and grow the tax base, not to pass more and higher taxes that cost the state more jobs and residents.