Illinois’ small business owners are not impressed with their
state’s hospitality.
A recent survey conducted by Thumbtack, an online services company, interviewed
more than 7,500 entrepreneurs and small business owners from across the nation,
to score each state on its level of business-friendliness. And Illinois came out
in the back of the pack – placing 50th most friendly among the 50 states.
The company has conducted its annual Thumbtack Small Business Friendliness
Survey since 2012, which it bills as “the largest continuous study of small
business perceptions.” And while Illinois has consistently underperformed each
year since its inception, this year saw the Land of Lincoln fall to its lowest
score.
Respondents gave Illinois an “F” on its overall level of friendliness. The
survey also included questions covering three specific aspects of the state’s
regulatory climate: taxes, labor and licensure. Illinois earned a failing grade
in all three, leading to an additional “F” grade for the state’s overall score
on regulations. The state earned a “B” – its only above-average score – on the
ease with which small business owners feel they’re able to hire their employees.
Illinois small business owners also gave the state’s government websites a
failing grade, but relented to award a pair of “D” grades for training and
networking programs and the level of difficulty in founding their businesses.
One common complaint the survey found shared among small business owners
nationwide is a perceived preference by state and local governments for larger
companies over smaller ones. Amazon’s bid for a second headquarters has
amplified such favoritism, and Illinois has been no exception. The Prairie State
pitched $2.25 billion in tax incentives in its courtship of the e-commerce
giant. And while HQ2 hasn’t settled on a home yet, Illinois has already
delivered $112 million in tax credits to the company in previous deals.
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Entrepreneurs’ low view of Illinois shouldn’t come
as a surprise to state lawmakers, who have in recent years pummeled
the state’s business community with two income tax hikes. Illinois’
2011 income tax hike cost the state economy $55.8 billion in real
GDP from 2012 to 2016.
More recently, in 2017, lawmakers overrode Gov. Bruce Rauner’s veto
to push through a 32 percent permanent income tax hike – the largest
in state history – spiking the corporate income tax rate to 7
percent from 5.25 percent. As Illinois continues to weather the
effects of the 2011 tax hike, the 2017 increase can be expected to
cause further damage.
Revenue the state has struggled to generate in economic activity,
lawmakers have opted to make up for with tax hikes. But this only
produces the opposite effect: As routine tax hikes test the
tolerance of small business owners, talent and entrepreneurship
finds itself on the other side of state lines. What’s worse,
Springfield hasn’t seemed to have taken the hint. A majority of
House lawmakers sided with House Speaker Mike Madigan in passing a
nonbinding resolution declaring their support for a progressive
state income tax – a proposal that would crush Illinois small
businesses.
Come next session, lawmakers would be wise to leave their failed
progressive income tax bid behind and instead address the state’s
spending problem that pushes lawmakers toward tax increases – and
small businesses toward the state border.
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