The simple solution: Repeal the tax hike

by Ted Dabrowski Earlier this year, lawmakers raised income taxes by a record amount. The tax increases included a hike in the state’s corporate tax rate to 7 percent, up from 4.8 percent. When combined with the personal property replacement tax levied on businesses in Illinois, they now face a corporate tax rate of 9.5...

by Ted Dabrowski

Earlier this year, lawmakers raised income taxes by a record amount. The tax increases included a hike in the state’s corporate tax rate to 7 percent, up from 4.8 percent. When combined with the personal property replacement tax levied on businesses in Illinois, they now face a corporate tax rate of 9.5 percent.

The tax increase led to a revolt among many of the largest and oldest businesses in the Chicago area, most prominently the CME Group. A tax package emerged weeks ago that would give big breaks to CME and Sears, along with a few smaller breaks to some other businesses. Gov. Pat Quinn and others have demanded that the CME tax breaks coincide with an increase to the state’s earned income tax credit, which, ironically, provide practically no tax relief to most middle-class families who had their taxes increased last January.

There’s a paradox here. Getting rid of the corporate tax increase (which is already scheduled to fall to 5.25 percent in 2015 and down to 4.8 percent by 2025, not factoring in the personal property replacement tax) would provide approximately $3 billion in tax relief over the next 10 years. The deal currently under consideration would cost the state treasury at least $3.1 billion over that same period. That means lawmakers are considering a more complex, more expensive solution than simply getting rid of the corporate tax increase that got Illinois into this crisis in the first place.