* From the Illinois Observer…
Illinois corporations will seek a 50 percent reduction in the state corporate income tax under legislation introduced today by House Speaker Michael J. Madigan (D-Chicago).
“For many years, we have listened to employers about the best manner to improve the business climate,” said Madigan.
“We have tackled worker compensation reform, reduced the estate tax and created an independent tax tribunal,” the speaker stated. “Cutting the corporate income tax rate is another step I am asking the legislature to consider.”
Under the plan, H.B. 4479, the corporate state income tax will be reduced from 7% to 3.5% on business profits. The move will see Illinois drop from 5th to 35th on the national income tax ranking of the states, according to the Federation of Tax Administrators. The Personal Property Replacement Tax paid by business remains unchanged at 2.5% and results in a total rate of 6%.
“I am introducing this legislation so the Revenue & Finance and State Government Administration Committees’ joint hearings on tax policies can consider the impact this will have on business location and expansion plans,” Madigan noted.
The measure, which has a January 1, 2014 effective date, will provide an estimated $500 to $700 million business savings for FY 2014. The FY 2015 savings could exceed $1.5 billion.
“I am hopeful this legislation will encourage CEOs to grow their work forces with good paying jobs, “Madigan said.
In December, 2013 the Speaker called on the Illinois House committees to continue hearings on tax policy questions in the wake of a new wave of businesses calling for tax breaks as a condition for relocating to or remaining in Illinois.
At the time, Madigan argued “we should take a more long term approach to helping all job-creating businesses in Illinois thrive and succeed. This must include a thorough review of how we currently provide incentives to big corporations.
During the 2013 North Carolina corporate rate cut debate, Governor Pat McCrory argued the tax was “economically destructive” and a lower rate was “critical to putting residents back to work.” North Carolina cuts rates from 6.9 % to 6.0% this year and 5% in 2015.
“State tax policy can have a critical impact on multinational corporations especially when Congressional gridlock has stalled any meaningful action in Washington,” Madigan said.
The Speaker’s cuts will make Illinois rates less than or equal to the surrounding states. According to the Federation of Tax Administrators the surrounding state rates are: Kentucky, 6%; Indiana 7.5%; Iowa, 12.0%; Missouri, 6.25% and Wisconsin 7.90%.
*** UPDATE *** An interesting retort from the NFIB…
“We appreciate Speaker Madigan’s attempt to reduce the income tax burden in Illinois,” said Kim Clarke Maisch, the state director of the National Federation of Independent Business.
“Unfortunately about 75% of small businesses, the true job creators, pay the personal income tax and not the corporate income tax. So while this is good for one-fourth of the businesses in Illinois, it does nothing to reduce the tax burden of the vast majority of small business owners in Illinois.”
*** UPDATE 2 *** We have a couple of state legislative responses. First up, GOP state Rep. Dave McSweeney…
I strongly support Speaker Madigan’s legislation that would cut the all-in corporate income tax rate from 9% to 6%. I also support cutting individual tax rates so that small businesses and families can benefit. Cutting tax rates will help encourage much needed economic growth and job creation.
And Democratic state Rep. Jack Franks…
“Following yesterday’s State of the State speech, the need for urgent action to improve the economic outlook in our state could not be more apparent. At a time when Illinois’ economy has been been pushed to the brink of disaster and taxpayers crave real, substantive reforms, the governor chose to give a pep talk with little in the way of policy proposals to help Illinoisans struggling to find jobs in a stagnant economy.
“Despite the rosy narrative laid out by Governor Quinn, Illinois’ credit rating is the worst in the United States and recent studies have ranked our state last in the nation in job creation. This would lead any serious observer to the conclusion that Illinois’ business climate is in desperate need of serious reform.
“House Bill 4479, introduced today, is exactly the type of targeted and specific action that will produce verifiable gains for hard-working families across Illinois. Reducing the tax burden on employers will free up capital for small-business owners to reinvest in their enterprises and hire more workers, while sending a signal to businesses across the country that Illinois is making serious efforts to restore our competitiveness and is once again open for business.”
*** UPDATE 3 *** Sun-Times…
The governor appears to have been blindsided by Madigan’s proposal, as others were at the Capitol, and offered no clear indication whether the speaker’s plan is something he’s prepared to embrace this spring.
“Building and protecting the middle class is our priority. That’s why the governor is proposing a bold commitment to early childhood,” Quinn spokeswoman Brooke Anderson told the Chicago Sun-Times. “We’ll be working on our budget over the coming weeks, and we’ll take a look at the options.”
*** UPDATE 4 *** Sen. Bill Brady…
“I am glad to hear the Speaker talking about a tax cut rather than a tax increase. I believe his effort to create a better jobs climate in Illinois would be even better served if he included a cut in the personal income tax rate, which would benefit small businesses as well as Illinois families.”
*** UPDATE 5 *** Treasurer Dan Rutherford…
“I am glad to see that Illinois House Speaker Michael Madigan has proposed reducing the state’s corporate income tax. Putting Illinoisans back to work must be a top priority, as is improving our business climate. Reducing the corporate state income tax to 3.5 percent sends a strong message to employers that Illinois is serious about becoming a better home for businesses.”