Saturday, May 15, 2010
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Illinois gets a D on business

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[May 15, 2010]  CHICAGO -- Budget instability, taxes and regulations combine to make Illinois a hostile place to do business.

At least that's what the nation's business leaders are saying, according to a poll from the Connecticut-based Chief Executive magazine. Illinois ranked 46th out the 50 states and Washington, D.C., for the second year in a row, a far cry from the 17th ranking it held in 2005.

Illinois regulations on environment, health care and workers' compensation laws, as well as the state tax and fee rates, have all contributed to unease among the business community.

But the state's 7.3 percent corporate income tax rate is middle of the pack. In fact, Illinois' corporate tax rates are lower than in Indiana, which finished 16th in the poll -- the highest ranking in the Midwest.

So why are businesses wary of coming to Illinois?

Marshall Cooper, the magazine's publisher, said attitude matters: The perception among business executives is that lawmakers and government agencies in the Land of Lincoln do not have their best interests in mind.

"There's no doubt that uncertainty is not good for business and making investments. CEOs need to know there's continuity and stability with the regulation laws, fees, taxes," he said. "So when things are in flux, it makes it hard for businesses to invest heavily in an area."

The poll ranked states based on three criteria: taxes and regulation, living environment, and work force quality. Illinois' tax policy received a D-plus from executives operating in the state, which squeaked by other bottom-of-the-barrel states like Michigan, Massachusetts and the F-rated California. Texas received an A-minus grade for taxes and regulation, the highest in the nation.

Illinois grades improved to B-minus in the latter categories, which enabled it to move up to the 46th ranking, edging out Massachusetts.

The state's overall D grade is consistent with last year's grade, despite several business-friendly laws passed this year, including EDGE tax credits, which provide millions in tax relief to businesses that create new jobs. Gov. Pat Quinn credited the tax incentive program with bringing an expanded Ford plant to the Chicagoland area.

Kristina Rasmussen, vice president at the conservative Illinois Policy Institute, was not surprised by the poll's results, despite the tax credit program.

"Tax credits, while they can have a beneficial impact, are very small and limited," she said. "Really, what entrepreneurs are looking for in the long run is low, consistently stable rates, so they know tax credits are not going to expire."

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But some think the grades should not be taken too seriously. John Jackson, visiting professor of political science at the Paul Simon Public Policy Institute at Southern Illinois University-Carbondale, said Illinois' reputation as a high-taxation, regulated state is overblown by business interest groups.

"What I do think is a fair criticism is not the regulatory and tax environment, it's the chaos in the budget that has been created by the state government," he said. "That would give me real pause if I were a CEO thinking about where to locate a business or industry."

For the poll, Chief Executive magazine surveyed more than 650 executives across the country, mostly from medium to large businesses.

[Illinois Statehouse News; By BILL McMORRIS]



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