Illinoying News for Indiana
There's a fresh sheriff in town.
His name is Bruce.
And he's our new Governor.
For years, we've been having to put-up with these cocky billboards from our Hoosier friends:
Now that Brucey-boy is in charge, there is a major, major hope that things will change here in Illinois.
(including these billboards)
So, here's some "Illinoying News for Indiana" by Joe Crain......
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Our neighbors in Indiana and Wisconsin love to entice Illinois companies with the promise of lower taxes.
Too bad for them: Their sales pitch lost most of its punch on Jan 1. That's when a 2011 Illinois income tax increase began rolling back. As a result, income tax differentials with neighboring states are shrinking dramatically, even flipping in Illinois' favor in some cases.
Illinois' personal income tax rate has dropped to 3.75 percent from 5 percent, and the corporate rate to 7.75 percent from 9.5 percent. The cuts of that size change the calculus for any company mulling a run for the border.
About two-thirds of Indiana's corporate tax advantage just evaporated. Corporations pay 7.0 percent in Indiana, which will reduce its rate to 6.5 percent on July 1.
Changes in relative personal income tax burdens are even more dramatic. Indiana's state levy of 3.3 percent is still a bit lower than Illinois' rate, although the spread is much smaller. But anybody eyeing a new home in Hoosierland should keep in mind the county income taxes imposed as tax-cutters in Indianapolis drained the pool of state revenues available to localities.
SMALL-BUSINESS IMPACT
Personal income tax rates in the 15 northern Indiana counties closest to Chicago range from 0.9 percent in Laporte County to 3.1 percent in Pulaski County. In every one of those counties, the combined personal income tax rate now exceeds the total Illinois rate.
That means a steeper tax bill not only for employees, but also for subchapter S companies taxed at individual income tax rates.
As for Wisconsin, the rollback ended Dairyland's brief stint as a lower-tax jurisdiction than Illinois. Wisconsin's graduated personal income tax rates start at 4 percent and top out at 7.65 percent, well above Illinois' new rate.
And its corporate rate of 7.9 percent, well below the 9.5 percent Illinois charged until Dec. 31, now exceeds our 7.75 percent rate. (These figures include the 2.5 percent personal property replacement tax charged to Illinois companies.)
Of course, income tax rates are just one of the factors relevant to a company's choice of location. But they've been a key talking point for nearby states that have aggressively pursued Illinois companies since the 2011 tax hike.
ADVANTAGE ILLINOIS
Both Wisconsin and Indiana have touted their business advantages in advertising campaigns, most memorably in the latter's “Illinoyed by high taxes?” tagline.
Despite the publicity Indiana has managed to gin up around every small company that crosses the border, its campaign hasn't triggered a stampede out of Illinois. That's because Illinois still has more of the things growing businesses need, like a huge talent pool of highly skilled workers, world-class universities, first-rate cultural amenities and an airport with direct connections around the globe.
Those are the factors that attract cutting-edge companies in high-growth industries, like the cyber-security firm that just announced plans to move to Chicago from suburban Washington, D.C. It would take an awfully big tax advantage to get such a company to Indiana.
The question is how long Illinois' newfound tax parity will last. The phaseout of the 2011 tax hike will cost Illinois nearly $4 billion in annual revenue.
“The steep rollback in income tax rates would dramatically destabilize Illinois' already weak financial condition,” the Civic Federation of Chicago warned in a report last year.
Unstable state finances aren't exactly appealing to business owners, who value predictability. Let's hope our new Gov. Bruce Rauner and state legislators can preserve at least part of the recent tax rollback while righting the financial ship.
If they can accomplish that, Illinois businesses will have even less reason to return phone calls from across the state line.
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Nice, huh?
TAKE THAT HOOSIERS!!
Out for now......
Matt
