WEST DUNDEE, Ill. (WBBM/CBS) — Some local business owners say just as the economy was beginning to improve, now Illinois is making things tougher again with its new corporate tax hike.
As WBBM Newsradio 780’s Regine Schlesinger reports, the green shoots of the recovery are just starting to grow, but some business owners say the tax increase could amount to an early frost.
LISTEN: Newsradio 780’s Regine Schlesinger Reports
Martin Matushek, the owner of M2 Polymer Technologies in West Dundee, told the Daily Herald he was hoping to hire two more workers this year, but now will not.
“I’m willing to take some pain… but they’re not addressing anything else to save money,” Matushek told the Daily Herald.
Doug Whitley, president of the Illinois Chamber of Commerce, said Gov. Pat Quinn overreached, and the General Assembly just went along with it, sending a message that Illinois is anti-business.
The tax hike raises the personal income tax from 3 to 5 percent for four years. Then the rate drops to 3.75 percent. In 2025, it would drop again to 3.25 percent.
The hike will also boost the corporate income tax rate by nearly 50 percent, from 4.8 percent to 7 percent. In 2015, it would drop to 5.25 percent and in 2025 would drop again to the current rate of 4.8 percent.
In addition to the corporate income tax, many businesses in Illinois pay a “Personal Property Replacement Tax” of 2.5 percent of income, bumping their corporate tax rate to 9.5 percent.
Some Chicago business owners also told CBS 2’s Vince Gerasole on Wednesday that the tax hike is leaving them worried.
“I have to pay out more but I’m not gonna get in as much,” said Heleen Thanasouras, owner of Lou Mithcell’s restaurant in the Loop. “If you’re raising everyone’s personal income tax as well, that cuts down on what comes to me and then they want me to pay more of less that I got.”
Deirdre Jordan, president of Troscan Design, a Near West Side fine furniture store, said local businesses were already hurting because of the recent recession.
“When the economy dropped we had to let go and cut back drastically,” Jordan said.
The small furniture manufacturer had already cut its work force in half to 16 to survive the recession. Jordan was angry that state lawmakers didn’t make the same sacrifices business owners have.
“Only increasing the taxes without reciprocating (spending) cuts is not only short-sighted, but difficult to swallow; because I had to make big cuts,” Jordan said.
Even a major operation like Turano Bakery, employing 1,000 workers, was worried about the future now that taxes will go up.
“It looks like we’ll have to charge more,” he said.
Some business are already being wooed by other states. The governors of Wisconsin and Indiana both have said Illinois’ tax hike will draw businesses to their states.
But in Wisconsin, the state income tax rate is higher for most taxpayers than in Illinois.
Wisconsin has a graduated income tax rate that starts at 4.6 percent for taxpayers earning less than $10,070 a year. For those that make up to about $20,000 a year, it jumps to 6.15 percent. The rate ranges between 6.5 percent and 7.75 percent for higher incomes in Wisconsin.
Wisconsin’s corporate income tax rate also is higher than Illinois — 7.9 percent compared to the new 7 percent. And, while Wisconsin does not have the additional “Personal Property Replacement Tax,” it does have a state property tax.
As for Indiana, while it has a lower income tax rate than Illinois at 3.4 percent, individual counties are allowed to impose their own income taxes, some of which are as high as 3 percentage points. Indiana’s corporate income tax is 8.5 percent, plus any relative local rates.