Pritzker progressive tax may send oil transport business out of Illinois
Most business is mobile. Most of Illinois is close to another state. Add a progressive state income tax and watch businesses such as Piasa Motor Fuels cross the bridge to Missouri.
Business owner Matt Schrimpf has a geography lesson for Illinois leaders: The state is long and narrow, with six neighboring states happy to accommodate businesses and their workers.
Schrimpf’s business, Piasa Motor Fuels LLC, near Alton, Illinois, is about five miles from Missouri. After 87 years in Illinois, the progressive state income tax proposal by Illinois Gov. J.B. Pritzker may be enough to push him and his 48 employees across the state line.
“With the technology we all have today, most businesses are portable,” Schrimpf said.
The fuels transport, storage and pipeline business grew from a single truck and a gas station opened in 1932 by Schrimpf’s great-grandfather. Five generations of Schrimpfs have worked hard to grow the business, with the state profiting from their decades of work. Now, leaders in their home state are vilifying them with calls for a “tax on the rich.”
“We didn’t get here overnight. It was years of blood, sweat and tears to be successful, at no cost to the state,” Schrimpf said. “They benefitted from our work, and now they want more and more and more and more.”
Illinois puts the fuels business at a disadvantage when it comes to its workers’ compensation law and licensing fees for his trucks, he said. Illinois’ flat income tax rate was one advantage over Missouri.
“As soon as it increases … there’s no reason to have our corporate headquarters in Illinois,” he said. “That’s not sustainable. It’s my job, it’s any business owner’s job, to give the company and the employees the best chance of sustainability.”
Missouri is becoming even more attractive: Their top corporate income tax rate drops to 4 percent from 6.5 percent in tax year 2020, an effort by Missouri state leaders to better compete for new employers and retain existing ones.
Schrimpf said the progressive tax will exacerbate the fiscal death spiral in Illinois. He said he tried to impress that fact on southwestern Illinois state Reps. Monica Bristow, D-Godfrey, and Katie Stuart, D-Edwardsville.
“My question to them was, ‘Is it easier to move when you make $1 million or $10 million?’ The more you make, the easier it is to move,” he said.
When the high-earners leave, he said, the financial services and other layers of the business community fall away and leave the economy ever poorer, with greater need for government services shared by fewer, poorer remaining residents. He said decades of future losses are not worth a short-term spike in tax revenue.
“Initially there’s a bump, but certainly over the longer term they’ll run existing businesses out and any new businesses that start here and become successful, as long as they are portable, they will also leave, in my opinion,” Schrimpf said.
He said progressive tax rates will keep rising – 9 percent, 12 percent – as long as the state employee pensions remain massively underfunded. The state’s employee pension systems consume more than $1 of every $4 available to operate the state, yet its combined pension fund debt remains $133.7 billion by state estimates and $250 billion by ratings service estimates.
“If they don’t fix the cost issues, it doesn’t matter what they do.”