Capitol Fax.com - Your Illinois News Radar

Texas, schmexas

Posted in:

Illinois

* A new study by the Anderson Economic Group ranks Illinois 20th nationally in its business tax burden, “defined as the share of pretax operating margin that a firm has to pay out in combined state and local taxes,” according to Greg Hinz…

By that standard, businesses in Illinois paid 9.6 percent of their pretax profit in state and local taxes in calendar 2011, more than the average of 8 percent paid by the 10 lowest tax states but less than the average 14 percent by the 10 highest states.

The actual range among the states was from 5.1 percent in Delaware to 25.2 percent in Alaska, where the number is skewed by that state’s dependence on taxes levied on natural resources like petroleum, which tend to be high.

Perhaps more significant, Illinois ranks relatively well among other Midwestern states, even after jacking up its income tax at the beginning of 2011. Iowa is lower at 8.5 percent, and Missouri just below at 9.2 percent. But higher are Minnesota (10 percent), Indiana (10.6 percent), Ohio (11.1 percent), Gov. Scott Walker’s Wisconsin (11.3 percent) and Michigan (13.3 percent).

Down in Texas, whose Gov. Rick Perry recently came up here ona rather bellicose corporate raiding mission, the total tax burden is a little lower than ours. But at 9.2 percent — compared with 9.6 percent in Illinois — the difference is what a good Texan might call a lil’ itty-bitty.

Wanna bet that the Tribune editorial board, Bruce Rauner, Ty Fahner, the Illinois Policy Institute and the other folks screaming about how Illinois is about to die a self-inflicted tax death completely ignore this study?

* But that’s not to say we don’t have some very real problems here. For example…

For every hundred dollars in payroll, Texas employers pay 39 cents for workers’ compensation insurance; their Illinois counterparts pay $1.10.

Few big companies actually pay the full tax rate, but workers’ comp is another story. It has to be addressed… again.

posted by Rich Miller
Friday, May 10, 13 @ 2:45 pm

Comments

Relative to work comp, since the Act was amended two years ago, the Appellate Court has hammered business, even when the Commission has tried to do the right thing. Perhaps a reform package which specifically flips these rogue AC decisions might help as well.

Changing the rules is fine, but the guys calling balls and strikes have to do their part too.

Comment by Geneva Guy Friday, May 10, 13 @ 3:01 pm
That study has an awfully narrow definition when it comes to the real-world impact on a lot of these public policies.

As Rich correctly points out, there are other issues at play that make this place toxic for job creation. Workman’s comp is one of them, but you’ve also got property taxes, higher energy costs/taxes, labor laws, a relatively high minimum wage compared to our neighbors, loads of administrative red tape, high pension burdens, etc. Plus there’s just the perception of corruption that prevents people from considering the state. Yes, the state has the EDGE tax program to attract certain large or expanding businesses. But all that does is shift the tax burdens to the small & medium sized companies that actually employ the lion’s share of citizens out there.

But it really is an aggregate problem. Perhaps that’s why some of these issues seem so intractable. When we try to narrow our focus to *just one* thing, those who want to defend the status quo on that one item have a plausible argument they shouldn’t be the ones to be singled out. It really is a situation where a dozen or so factors are moderately bad for job creation, which synergize to make for a lousy overall environment.

Comment by John Galt Friday, May 10, 13 @ 3:03 pm
The problem with our taxes has been that we have all these specilized tax breaks. As a result we do not collect the minimium taxes we want, so we raise the overall rate to try and overcome the deductions. The problem is it slams a business that does not qualify for most or any breaks hard.

We would be better served to eliminate the deductions and set a low tax rate, but a rate withou deductions or exceptions.

Comment by Ghost Friday, May 10, 13 @ 3:08 pm
I wonder how many of those corporations actually paid those taxes?

How many are on corporate welfare in comparison to those paying full freight?

My guess is that a minority paid the majority of those taxes. And it’s not the large companies paying.

Comment by Keep Calm and Carry On Friday, May 10, 13 @ 3:08 pm
AMEN on Workers’ Compensation.

Secondly, every company in Illinois pays taxes including large employers. They pay income, sales, property, payroll, and other taxes.

Comment by dazed & confused Friday, May 10, 13 @ 3:28 pm
From today’s New York Times:

(Texas)”is the only state that does not require companies to contribute to workers’ compensation coverage.”

That is not a good thing for Texans. And makes any comparison between Illinois and Texas work comp rates worthless.

The story also includes some good stats on what our regulation gets us. Again, it’s not good to be a Texan:

http://www.nytimes.com/2013/05/10/us/after-plant-explosion-texas-remains-wary-of-regulation.html?pagewanted=all&_r=0

Comment by Chi Friday, May 10, 13 @ 3:29 pm
–Few big companies actually pay the full tax rate, but workers’ comp is another story. It has to be addressed… again–

True, and a tough nut to crack. Lot of chefs in the kitchen — workers, industry, docs and lawyers.

You get that crew together on anything, and we should set you up a table in Geneva to work it out with the Palestinians and Israelis.

I love the Texas story, but I think it’s completely misunderstood.

Before they struck oil in the East Field around 1900, their economy ran on timber, cotton and beef.

Oil changed everything. Until OPEC, the Texas Railroad Commission set the world price by regulating who could drill where and how much. They still do that.

They’ve been the nation’s gas pump for more than 100 years. They’ve had an unlimited supply of cheap labor from Mexico. Lyndon Johnson and Sam Rayburn primed the pump to make sure they got a heaping-helping of the military/industrial complex.

Yet looking at how the Average Joe makes it there, I don’t think they got enough out of those advantages. Lousy schools, most with health insurance, etc.

Yankees would have done a lot better with that oil.

Comment by wordslinger Friday, May 10, 13 @ 3:42 pm
Unfortunately, the General Assembly seems intent to go the opposite way on workers comp. See Sen. Mulroe’s amendment to HB 3390.

Comment by Bluefish Friday, May 10, 13 @ 3:45 pm
How much of Illinois’ “high” worker compensation costs is related to the higher cost of living, medical and otherwise, in the Greater Chicagoland area?

Comment by Anyone Remember? Friday, May 10, 13 @ 3:50 pm
The study does not measure tax bills Springfield stuck in the drawer to be sent later, especially unfunded pension liabilities. Nor does it include overall tax burden which people, not corporations, pay. You are detached from the business world and economic reality if you think Illinois has not slipped into an uncompetitive position.

Comment by abc123 Monday, May 13, 13 @ 8:26 am