Analysis finds eliminating incentives for Illinois businesses will raise costs, lower wages

[March 26, 2021]  By Cole Lauterbach

(The Center Square) – Closing “unaffordable corporate loopholes” used by Illinois businesses would result in higher costs for local consumers and lower wages, according to an analysis of the proposals.

Using a biannual analysis from the Minnesota Department of Revenue, the Taxpayers’ Federation of Illinois estimates Gov. J.B. Pritzker’s proposed budget for the coming fiscal year would place an $8.8 billion burden on Illinois consumers in the form of higher prices, reduce wages by $403 million, and reduce profits by $2.3 billion. That’s in comparison to not having any tax burden.

The difference in what a business is taxed and who pays the tax is referred to as “legal incidence” and “economic incidence” by Mike Klemens, president of KDM Consulting in his analysis for the nonprofit.

“The notion that raising taxes on businesses protects families ignores a critical fact: individuals ultimately pay a significant amount of taxes originally imposed on businesses,” Klemens writes.

Pritzker’s office didn’t respond to a request for comment on the analysis Thursday.

The analysis takes an admitted leap in assuming Minnesota’s businesses would respond in the same manner that Illinois’ would, but Klemens says there are few other estimations that would have access to both business and individual taxpayer data that the state’s revenue department would.

Klemens found “both the corporate franchise tax and the general sales and use tax were regressive (i.e. the effective rate decreased as income increased), across all [income levels].”

While the figures in the report seem to make a compelling argument against taxing businesses, Klemens said it also dilutes the thought that businesses in Illinois carry the heavy burden of state taxes.

“We all listen to businesses saying ‘this is terrible that we’re going to pay all these taxes,’” he said. “It’s not businesses that are paying most of them. It’s you and me.”