This article was written by Matt Porter and featured on Illinois Homepage on September 26, 2014. 

“Business friendly” may not describe the Land of Lincoln after it ranks second from last in a new study. The Chicago-based research group, American Economic Development Institute, ranked Illinois the 49th worst state for business just ahead of California.

The report looked at education levels, taxes and regulations, and government incentives for businesses. Illinois failed for its high tax rates and stringent regulations on business. The uncertainty facing the state’s budget and pension problems helped contribute to its failing grade for long-term financial planning.

Prescott Paulin helps his father run 300 Below, a small family business in Decatur. He said he’s not surprised by the low ranking.

“Illinois is a great place to work,” Paulin said, “But the politics and the taxes make it nearly untenable for us to remain here.”

300 Below started with a man and a dream. Paulin’s dad developed a high-tech way to freeze steel for strengthening. But, he said today’s taxes and fees would make the company tough to start.

“For instance our company, we started with $400 and a credit card,” Paulin said. “I can’t even pay $400 to incorporate in the state of Illinois.”

Paulin said among the top tax problems is the threat of a permanent income tax increase. He said keeping the tax hike will keep his company from investing.

National Federation of Independent Business state director Meg Maisch said businesses feel they’re under attack from state policies.

“When you have a government that’s constantly telling you you’re not doing enough,” Maisch said, “and on top of that, we’re going to put on more regulations, raise the minimum wage, and make it more expensive to do business, it makes many of my members think, ‘What is the point of being here?’”

Maisch said high taxes and over-regulation are shutting out hundreds of small businesses.

“When a small business leaves, there’s no press release. Nobody talks about it,” Maisch said.

Paulin said, unless the income tax is reduced to its previous 3 percent level, 300 Below may not stay in Illinois.

“My family’s here. This is home,” Paulin said. “But, if we have to leave, we will to save our business and our lifestyle.”

This isn’t the first time Illinois failed this survey. It’s failed the last four times since 2012. It received a “D” in 2010.

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