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Illinois Tax
Increase |
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 Today the Illinois State
Legislature voted to increase the personal and corporate
income taxes by 66% and 47% respectively. The personal
income tax rate will increase from 3% to 5%.
The corporate income tax rate will increase from
4.8% to 7%. This is an effort by Governor Quinn
to plug a budget gap of $15 billion. The measure is
expected to generate about $6.8 billion annually. |
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How will this new
measure affect small businesses in Illinois? Since most
small businesses pay taxes at the personal income tax
rate it mean that small business owners will be paying
higher taxes. Small business owners were relieved to see
that federal tax will remain the same, but their hope for
lower taxes in 2011 has been shattered. |
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Below is a chart that
shows the difference in personal income taxes you have to
pay between 2010 and 2011 based on income from $40,000 to
$200,000. |
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INCOME |
2010
TAXES |
2011
TAXES |
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$40,000 |
$1,200 |
$2,000 |
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$50,000 |
$1,500 |
$2,500 |
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$60,000 |
$1,800 |
$3,000 |
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$70,000 |
$2,100 |
$3,500 |
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$80,000 |
$2,400 |
$4,000 |
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$90,000 |
$2,700 |
$4,500 |
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$100,000 |
$3,000 |
$5,000 |
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$110,000 |
$3,300 |
$5,500 |
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$120,000 |
$3,600 |
$6,000 |
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$130,000 |
$3,900 |
$6,500 |
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$140,000 |
$4,200 |
$7,000 |
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$150,000 |
$4,500 |
$7,500 |
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$160,000 |
$4,800 |
$8,000 |
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$170,000 |
$5,100 |
$8,500 |
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$180,000 |
$5,400 |
$9,000 |
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$190,000 |
$5,700 |
$9,500 |
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$200,000 |
$6,000 |
$10,000 |
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Will small businesses move to
neighboring states with lower tax rates? Currently the
personal tax rate in Iowa is 0.36 - 8.9%, in Wisconsin
it’s 4.6 - 7.75%, in Indiana it’s 3.4%, and in Missouri
it’s 1.5 - 6%. States such as Texas, Nevada, Wyoming,
Washington, South Dakota, Tennessee, New Hampshire,
Florida and Alaska have no personal income tax rates.
In Tennessee and New Hampshire taxe is limited to
Dividends and Interest Income only. The 2010 Census
Report shows a migration from Illinois to states like
Texas and Nevada. Maybe small businesses will follow.
The blogs are filled with discussion from people who
have already decided to moved, as a result of the new
tax law. The blogs are also filled with discussion from
people who want to move but can’t because they can’t
find buyers for their homes. Given the higher taxes
(including real estate taxes) there is no long list of
people lining up to move to Illinois. |
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The corporate tax rate at 7%
will be the 3rd highest in the country behind
Minnesota and Pennsylvania. Businesses who pay taxes at
the corporate tax rate have a higher tax burden as
illustrated by the chart below. |
|
INCOME |
2010
TAXES |
2011
TAXES |
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$40,000 |
$1,920 |
$2,800 |
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$50,000 |
$2,400 |
$3,500 |
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$60,000 |
$2,880 |
$4,200 |
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$70,000 |
$3,360 |
$4,900 |
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$80,000 |
$3,840 |
$5,600 |
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$90,000 |
$4,320 |
$6,300 |
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$100,000 |
$4,800 |
$7,000 |
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$110,000 |
$5,280 |
$7,700 |
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$120,000 |
$5,760 |
$8,400 |
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$130,000 |
$6,240 |
$9,100 |
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$140,000 |
$6,720 |
$9,800 |
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$150,000 |
$7,200 |
$10,500 |
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$160,000 |
$7,680 |
$11,200 |
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$170,000 |
$8,160 |
$11,900 |
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$180,000 |
$8,640 |
$12,600 |
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$190,000 |
$9,120 |
$13,300 |
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$200,000 |
$9,600 |
$14,000 |
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Taxes are an important factor for businesses. The
more taxes businesses have to pay the less of their
income they get to retain to further the interest of the
business. Taxes influence decisions made about where to
locate the business, it impacts how much they can pay to
retain good employees, whether or not they should hire
new employees and it impacts their ability to be
competitive with domestic and international competitors.
By
Owen Daniels |
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