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Over the years, Illinois lawmakers have created a system that
could make even the most intrepid entrepreneur shudder. The Land of Lincoln is a tough place to do business, to be sure.
| ROADBLOCKS: Small firms
employ just more than half of the private-sector workforce and
created nearly two-thirds of nation’s net new jobs during the past
15 years, but small firms are the ones most hurt by the Prairie
State’s backward approach to taxes and regulation. |
For example, Office Depot has been capturing plenty of headlines.
The company recently merged with OfficeMax, and its executives were
pondering whether to use OfficeMax's Naperville, Ill., headquarters
or Office Depot's Boca Raton, Fla., site.
The Sunshine State won out.
It's not hard to figure out why.
Just consider:
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Illinois has a corporate tax rate of 9.5 percent (7 percent income,
2.5 percent personal property replacement tax) while Florida has a
5.5 percent corporate tax rate.
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Illinois has a personal tax rate of 5 percent while Florida has
none.
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For every $100 worth of payroll, Illinois employers pay an average
of $2.81 for workers' compensation insurance, compared to $1.84 in
Florida.
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Illinois' minimum wage is $8.25 per hour, compared to $7.79 in
Florida.
But a company as big as Office Depot has the political clout to go
to the Illinois General Assembly and push for special tax breaks. In
fact, the state Senate endorsed such a proposal, though it never
came up for a vote in the House.
For a small entrepreneur, the story is quite different.
They lack clout to cut sweetheart deals with politicians. And yet
they have to compete against large corporations that do get such
deals. More significantly, Illinois small businesses are saddled
with the state's burdensome taxes and regulations.
You see, it's not just Florida that Illinois has trouble competing
against.
It's just about every state that has a leg up on the Land of
Lincoln.
Just consider:
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A study conducted by the state of Oregon found that Illinois has the
fourth-highest workers' compensation rates in the nation.
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Illinois also has the fourth-highest minimum wage in the nation.
Illinois' corporate tax rates ranks, you guessed it, the fourth
highest in the nation.
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Given these numbers, it's little wonder that Illinois has the
11th-lowest rate of entrepreneurship in the U.S., according to the
Kauffman Entrepreneurial Index.
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And small businesses are the major job generators in the economy.
According to the U.S. Small Business Administration, small firms
employ just more than half of the private-sector workforce and
created nearly two-thirds of nation's net new jobs during the past
15 years.
Please keep in mind, every big company started out small.
Not all that long ago, Apple was an idea of Steve Jobs, who was
running the business out of his home's garage. The same could be
said of Amazon, which not that long ago was just a fledgling startup
in Seattle.
Small firms are the ones most hurt by the Prairie State's backward
approach to taxes and regulation.
There seems to be a mindset among Illinois lawmakers that business
is a bottomless pit from which they can continue to extract money.
According to a 2013 Bradley University/University of Tennessee
study, 25 percent of small businesses fail in their first year, and
73 percent go under within a decade.
Those are pretty daunting odds.
Not surprisingly, entrepreneurs look for places to start a business
where they are most likely to succeed.
And increasingly, they are concluding Illinois is not one of those
places.
But the secret to turning things around is pretty straightforward:
lower taxes and fewer regulations for all businesses and individuals
— not just the politically favored.
With that, more people will be willing to take a chance on Illinois.
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Scott Reeder is a veteran
Statehouse reporter and the journalist in
residence at the Illinois Policy Institute. He can be reached at
sreeder@illinoispolicy.org. Readers can subscribe to his free
political newsletter by going to
ilnews.org or follow his work on
Twitter: @scottreeder.
[This
article courtesy of
Illinois Watchdog.]
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