Small Business Saturday: Illinois’ best job creators experienced sharp slowdown last year

November 27, 2019

More than 4,600 small business establishments shuttered in Illinois last year, even though they still create the vast majority of the state’s net new jobs.

CHICAGO (Nov. 27, 2019) – As Illinoisans shop at small businesses this Saturday, new analysis shows these business owners need support now more than ever.

Small businesses are the foundation for growing Illinois’ economy. The Illinois Policy Institute found businesses with fewer than 50 employees generated nearly 311,000 jobs in Illinois, or 58% of all jobs created, from 2011 to 2018. Last year, 91% of net new jobs were created at businesses that were less than a year old.

Despite leading jobs growth in Illinois, small business creation rates declined last year. In 2018, Illinois shed 4,666 small business establishments, a decline of 2.9%. Since the end of the recession, the rest of the nation has created small businesses at more than double the rate of Illinois (8.3% in the U.S. compared to 3.9% in Illinois).

Illinois’ small businesses face worse strain next year if voters approve Gov. J.B. Pritzker’s $3.4 billion progressive income tax hike. Pritzker’s progressive income tax plan would likely harm more than 110,000 small businesses or partnerships in the state, while raising corporate income taxes to the third highest in the nation.

Small business analysis finds:

  • Businesses with fewer than 50 employees created the vast majority of net new jobs in Illinois in 2018, according to data from the Bureau of Labor Statistics.
  • Small businesses accounted for 61% of jobs growth, meaning small businesses are the primary driver of Illinois’ recovery since the Great Recession.
  • More than 77% of businesses in Illinois are small businesses employing less than 50 employees. Illinois holds a greater share of small businesses than the national average.
  • The state’s high tax environment has created one of the least friendly business tax climates when compared to neighboring states, primarily driven by high property taxes, unemployment insurance and corporate taxes.
  • Taxes were one of the main reasons for Illinois’ ranking as the least friendly state for small businesses in 2018.
  • Research shows an increase in the top marginal tax rate is associated with a decrease in both hiring by business owners and wages for employees.

Statement from Orphe Divounguy, chief economist for the nonpartisan Illinois Policy Institute:

“Small businesses are very responsive to tax policy and the regulatory climate, meaning any time government makes it more expensive to do business it’s less likely new businesses will start up. Property and income taxes are already crushing small businesses and would-be entrepreneurs in Illinois, and the uncertainty surrounding the progressive income tax vote makes it even more difficult for businesses to invest their time and creative energy in local communities and create jobs.

“Lawmakers should push for spending reforms such as a constitutional amendment ensuring pension benefits match what taxpayers can afford, as well as a spending cap to allocate taxpayer dollars efficiently and eliminate the need for tax hikes. That’s how we provide stability and growth to Illinois’ families and small businesses, bolstering an important segment of the state’s economy.”

To read the full analysis, visit:

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