According to Illinois Policy, businesses with less than 50 employees created the vast majority of new jobs in the state of Illinois, accounting for 83 percent of new job growth in 2017. In fact, small businesses, which generated nearly 130,000 new jobs between 2011 and 2017, are the primary reason for the state’s recovery from the most recent depression. That is more than 60 percent of all new jobs created in the state. Because of its reliance on small business, one might think that the state would thank mom and pop shops via tax incentives and small business-friendly legislature. Unfortunately, the opposite seems to be happening.
Though Illinois is so reliant on small business for revenue, the small business climate in the Land of Lincoln is far from healthy. In fact, in August of 2018, entrepreneurs and small business owners gave Illinois a failing grade in terms of small business friendliness. The state ranked last in the nation. This is due to many reasons, but the most significant is the increasing number of tax hikes.
The last tax hike Illinois lawmakers implemented was back in 2011, and the local economy suffered as a result. Just as small businesses begin to recover, lawmakers proposed another tax hike — this one a 32 percent increase — in 2017. Despite attempts by the Governor to veto the hike, lawmakers passed the bill.
The tax hike hit small businesses the hardest. Though the corporate tax rate remains at a low 7.75 percent, small business owners can expect to pay up to 9.75 percent on their personal income tax returns, according to Tax Foundation. Those businesses that use the pass-through method can expect to pay up to 11.25 percent. The increase is the largest in state history, and the rate the second highest in the nation.