Small business owners give Illinois an ‘F’ in friendliness

Small business owners give Illinois an ‘F’ in friendliness

A recent survey found Illinois to be the least accommodating state in the nation for small businesses.

Illinois’ small business owners are not impressed with their state’s hospitality.

A recent survey conducted by Thumbtack, an online services company, interviewed more than 7,500 entrepreneurs and small business owners from across the nation, to score each state on its level of business-friendliness. And Illinois came out in the back of the pack – placing 50th most friendly among the 50 states.

The company has conducted its annual Thumbtack Small Business Friendliness Survey since 2012, which it bills as “the largest continuous study of small business perceptions.” And while Illinois has consistently underperformed each year since its inception, this year saw the Land of Lincoln fall to its lowest score.

Respondents gave Illinois an “F” on its overall level of friendliness. The survey also included questions covering three specific aspects of the state’s regulatory climate: taxes, labor and licensure. Illinois earned a failing grade in all three, leading to an additional “F” grade for the state’s overall score on regulations. The state earned a “B” – its only above-average score – on the ease with which small business owners feel they’re able to hire their employees.

Illinois small business owners also gave the state’s government websites a failing grade, but relented to award a pair of “D” grades for training and networking programs and the level of difficulty in founding their businesses.

One common complaint the survey found shared among small business owners nationwide is a perceived preference by state and local governments for larger companies over smaller ones. Amazon’s bid for a second headquarters has amplified such favoritism, and Illinois has been no exception. The Prairie State pitched $2.25 billion in tax incentives in its courtship of the e-commerce giant. And while HQ2 hasn’t settled on a home yet, Illinois has already delivered $112 million in tax credits to the company in previous deals.

Entrepreneurs’ low view of Illinois shouldn’t come as a surprise to state lawmakers, who have in recent years pummeled the state’s business community with two income tax hikes. Illinois’ 2011 income tax hike cost the state economy $55.8 billion in real GDP from 2012 to 2016.

More recently, in 2017, lawmakers overrode Gov. Bruce Rauner’s veto to push through a 32 percent permanent income tax hike – the largest in state history – spiking the corporate income tax rate to 7 percent from 5.25 percent. As Illinois continues to weather the effects of the 2011 tax hike, the 2017 increase can be expected to cause further damage.

Revenue the state has struggled to generate in economic activity, lawmakers have opted to make up for with tax hikes. But this only produces the opposite effect: As routine tax hikes test the tolerance of small business owners, talent and entrepreneurship finds itself on the other side of state lines. What’s worse, Springfield hasn’t seemed to have taken the hint. A majority of House lawmakers sided with House Speaker Mike Madigan in passing a nonbinding resolution declaring their support for a progressive state income tax – a proposal that would crush Illinois small businesses.

Come next session, lawmakers would be wise to leave their failed progressive income tax bid behind and instead address the state’s spending problem that pushes lawmakers toward tax increases – and small businesses toward the state border.

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