Dupage Policy Journal

Between the COVID-19 outbreak and Gov. J.B. Pritzker’s proposed progressive income tax, the business community of Illinois, and DuPage County, is in a tough spot.

DuPage County has already seen a spike in unemployment claims and is projected to lose 130,000 jobs during the coronavirus crisis.

On top of COVID-19’s disruption, businesses are expected to be disproportionately affected by the governor’s proposed progressive income tax which will go onto the November ballot for Illinois residents to approve.

"The progressive income tax amendment passed by the General Assembly last year removes Illinois’ flat income tax protection, allowing for a $3.7 billion income tax hike that would raise taxes on around 100,000 small businesses across the state," Bryce Hill wrote for Illinois Policy. "Small business owners from Decatur to Oak Lawn to Palos Hills to Bradford to Elk Grove Village to Chicago and beyond are pleading for state lawmakers to remove that amendment." 

The progressive tax is estaimated to cost the typical DuPage County family $3,500 per year as well as the loss of 280,000 jobs statewide. 

Hill wrote that such a tax increase will have more of an effect on the state's small businesses. 

Of the 33,330 businesses located in DuPage County. around 7,456 are estimated to be small businesses. 

"The progressive income tax rate structure passed by the General Assembly would hike taxes on around 100,000 Illinois small business owners in Illinois who file as S-corps or partnerships (also known as “pass-through” businesses)," Bryce Hill reported. "Small businesses are the economic engine of the state – responsible for roughly 60% of new job creation. Hiking their taxes would only serve to kneecap the economic recovery from the current downturn." 

Critics argue that adding a progressive income tax to the mix will affect already struggling businesses and families. 

Even before the COVID-19 crisis hit, opponents to the tax hike were sounding the alarm that the progressive income tax would cause problems, and that feeling hasn’t changed.

In February, the National Federation of Independent Business reported that small business optimism related to the economy was high. 

Mark Grant, who is the NFIB state director for Illinois, said in a column there are still problems with the proposed progressive income tax which could create big problems for business and for residents.

Grant wrote with a $3.2 billion budget deficit and $6.2 billion in unpaid bills, as well as $137 billion in unfunded pension liabilities, Illinois is not a fiscally healthy state despite having one of the highest tax loads in the country and that Pritzker pitched the progressive tax as more “fair” for those who pay it to bring in money to pay some of those bills.

"In the real-world higher tax bills mean less money to grow businesses, give raises, add benefits, or hire additional workers. Small business owners and their employees should remind themselves of this when they cast their votes in November," Grant wrote. "Our elected leaders have misled us before. They’ve told us that raising taxes will solve the state’s financial woes. It hasn’t, and it won’t. On the contrary, Illinois’ financial situation has only gotten worse as lawmakers have kept spending. The progressive tax is just another way for government big spenders to get their hands on more taxpayer dollars. We can’t afford to fall for Pritzker’s 'fairy tale.'"

The proposed tax plan would create different tax brackets across the state and those could be changed by a simple majority vote. This worries people who wonder if the General Assembly would use that vote to pass tax increases to keep spending, without addressing the deficit issues. There’s also related legislation that would tax corporate income at 10.49 percent, and for pass-through business income, that rate would be 9.49 percent – and that‘s where most of Illinois small businesses would feel a hit.

State Rep. David McSweeney (R-Barrington Hills) has asked lawmakers to remove progressive tax item from the November ballot. 

“We're in the middle of a national crisis and Illinois families are hurting. @GovPritzker - Please work with the General Assembly to immediately take your progressive tax hike off the ballot. Another tax increase would destroy many small businesses and hurt our citizens! #twill," McSweeney tweeted. 

Meanwhile Senate President Don Harmon (D-Oak Park) incorrectly stated last week was no easy way for the General Assembly to intervene.  

In contrast to Harmon's statements, the Illinois Constitution is clear on how the General Assembly can pull the ballot measure. 

“Amendments approved by the vote of three-fifths of the members elected to each house shall be submitted to the electors at the general election next occurring at least six months after such legislative approval, unless withdrawn by a vote of a majority of the members elected to each house,” the Illinois Constitution reads. 

Although Pritzker announced more than $90 million in emergency aid for small businesses impacted by the coronavirus, the sheer number of businesses statewide means that they won’t receive a giant aid package that could be meaningful.

If calculated per person, DuPage County’s share would be $6,477,485. There are 33,330 businesses in DuPage County alone, as of 2009, so the share for each business works out to $194.  But, they’re not going to be given out to every business equally. 

The coronavirus aid programs announced by Pritzker come through a variety of sources. The first is through the Illinois Small Business Emergency Loan Fund, which has $60 million allocated to support low-interest loans up to $50,000 for businesses in every industry outside of Chicago, according to the Western DuPage Chamber. Businesses with fewer than 50 employees and $3 million in revenue will be eligible to apply for loans where they will owe nothing for six months and repay the loan, with three percent interest, over the next five years.

The next program is the Downstate Small Business Stabilization Program, which focuses on small businesses in rural and suburban counties. It provides grants up to $25,000 for business up to 50 employees to partner with government agencies to obtain grants of up to $25,000 It redistributes the state’s Community Development Block Grant Funds for small business support.

The Hospitality Emergency Grant Program is a $14 million program focusing on bars, restaurants and hotels – it offers up to $25,000 for bars and restaurants or up to $50,000 for hotels. Eligibility for this one is more complicated. These grants are for payroll, rent, and job training and technology to help these businesses shift to pickup and delivery services.

According to the Western DuPage Chamber, eligibility works this way: bars and restaurants that generated between $500,000 and $1 million in revenue in 2019 are eligible for up to $25,000, and bars and restaurants that generated less than $500,000 in revenue in 2019 are eligible for up to $10,000. Hotels that generated less than $8 million in revenue in 2019 are eligible for up to $50,000. The program repurposes job training and tourism promotion funds to provide this emergency grant assistance.