Il Tax Increase: Is It Really That Bad?

What is there to say about the recent tax increase in Illinois that has not already been said? We have all heard the facts by now, right? The IL state income tax for individuals was raised 66%, from 3% of income to 5%. The corporate tax from corporations doing business in Illinois was raised from 4.8% to 7%. Yikes. Resulting from this breaking news earlier this month (outside of panic attacks suffered all over the Land of Lincoln) was neighboring governors putting out press releases trying to bait companies and individuals to neighboring states. Wisconsin’s Gov. Scott Walker referenced an old tourist motto when stating, “Escape to Wisconsin. Today we renew the call to Illinois businesses. You are welcome here” (we here at Root Realty appreciated the offer but kindly rejected). The city of Indianapolis placed three full page advertisements in Illinois newspapers hoping to entice IL business to relocate across the state line into Indiana. Mayor Greg Ballard, in an open letter to Illinois business leaders stated “…I invite you to take a serious look at Indianapolis…offering the same Midwestern work ethic and conveniences – but in a much more stable, affordable, and pro-growth economic environment.”

Before you pack your bags and move over to beautiful Indiana or Iowa, stop and take a moment to consider the recent tax hike from a broader perspective. Is it really that bad?

As stated earlier, for individuals with income in the state of Illinois, the state revenue tax was increased from 3% to 5%. However, due to President Obama’s recent 2% federal income tax cut on Social Security contributions, Illinois residents’ tax hike will be offset. Illinois will also have a smaller income tax than maybe surrounding states in the USA. About 30 states have income tax rates over 5% on middle-class workers, according to data from the Tax Foundation. In New York, an individual making $50,000 per year has a tax rate of 6.85%. In California, they pay 9.55%.

Companies simply crossing over the state line will not have a major benefit for their relocation either. The corporate tax affects all business conducted within the state of IL. If a company that owns a gas station in IL moves their corporate address to Indiana, they will still pay the IL corporate tax for sales within IL. With the city of Chicago containing over 3 million residents, do not expect businesses to ignore those consumers simply because of the tax hike. Let’s be realistic. It’s still Illinois and we still have Chicago, the third largest city in America. Governor Quinn was respectfully eloquent in his response to the neighboring states’ sales pitch: "Lots of luck to them, but that (rapid relocation)'s not going to happen…if we want to talk about the capital of the Midwest, the state that is the strongest is Illinois." Amen.

By: Horvay, Brent

Article Directory: http://www.articledashboard.com