Pritzker hands businesses $650M in taxes, fee hikes during pandemic
Since taking office, Gov. J.B. Pritzker has passed 24 tax and fee hikes worth $5.24 billion. Of that, $650 million directly targeted businesses as they fought through a pandemic economy.
New businesses are lifeblood to a state, bringing new jobs that draw new residents that grow the economy. So what can Illinois expect when Gov. J.B. Pritzker has added $5.24 billion in taxes to a shrinking state, and specifically imposed $650 million in new taxes on businesses as they tried to survive a pandemic?
Here’s what: Illinois was the only Midwestern state to drop in the Tax Foundation’s Business Tax Climate rankings in the past five years. Since 2017, Illinois’ business climate dropped from 26th to 36th.
Pritzker recently tweeted about how he’s helped businesses start and grow in Illinois. His actions, and the results, don’t line up with his claim.
Corporate franchise tax: $20 million
In 2019, Pritzker touted phasing out the corporate franchise tax, saying it would give relief to 300,000 small businesses. Two years later he reversed course.
The tax isn’t related to franchise businesses, such as fast food restaurants or other business chains, but rather taxes all businesses on their net worth – regardless of profitability. Only 15 other states implement this tax, which is complicated and disproportionally falls on small businesses.
Cap, delay credits for business operating losses for three years: $314 million
If a business loses money in 2020 and 2021, but earns a profit in 2022, tax law allows it to deduct the two years of losses from its earnings in 2022 and pay taxes only on the difference. This helps keep tax policy neutral over time and is especially important for businesses that experienced losses during the pandemic.
Unfortunately, Pritzker signed off on a $100,000-per-year limit on losses carried forward for three years.
Business owners are still able to carry forward losses above that amount, but they can’t claim the deduction until 2024, leaving them with less cash to grow, hire or give raises. Ultimately, this means a poorer recovery for every Illinoisan.
Delay expensing of business investments: $214 million
Illinois decoupled from federal provisions promoting pro-growth investments.
Federal tax reform included changes to allow full and immediate expensing, or 100% bonus depreciation, meaning companies can deduct the entire cost of a machinery or equipment investment in the year it was made, rather than dragging out the expensing over the lifecycle of the item.
But now, Illinois businesses must use the prior system of stretching out the deduction for Illinois taxes, discouraging investments that boost statewide recovery from the COVID-19 recession.
Double-tax the profits U.S. companies earn abroad: $107 million
Another aspect of federal tax reform was to end double taxation on profits U.S. companies earned overseas by allowing a 100% deduction for foreign dividends paid to the parent company. Those profits would have already faced taxation in the country where the income was earned.
Pritzker eliminated the credit for foreign dividends, which discourages those profits from being repatriated and brought to Illinois if the profits would receive more favorable tax treatment overseas.
Having a competitive tax system is important and Illinois is in danger of completely falling out of the race. But it could get even worse if voters approve Amendment 1 on the Nov. 8 ballot: businesses will be at risk for significant tax increases.
Illinois politicians must prioritize taking care of businesses by working to cut the punitive tax burdens on them. The only cuts Pritzker has fostered are to the chances a business can survive in Illinois.