How Business Tax Hike will Affect Locals, Village

Local business owners like Chris Adams face a double whammy under the state’s new personal and business income tax hikes.

The owner of Adams Collision in Huntley will see an increase from 3 percent to 5 percent in the personal income tax and a 4.8 percent to 7 percent increase in the corporate tax rate. The added income will be used to balance the state budget and pay off unpaid bills and other debts.

Adams said the timing couldn’t be worse since lots of businesses are still trying to get ahead in a shaky economy. His business had a pretty good year in 2010 but any inroads business have made may be overshadowed by the increase taxes.

He feels the new law will limit opportunities for corporations and small businesses.

“I think it’s really going to hurt business,” Adams said. “It’s not very business friendly.”

The measure Governor Pat Quinn singed into law Thursday could deter businesses from coming to Illinois, said CPA David Robbins.

“There’s no incentive for businesses to come here or stay here now,” said Robbins, a partner at Nieminski Robbins & Associates in South Barrington. He said the corporate tax increase could cause more damage than good.

“The tax increase will discourage businesses from coming to Illinois and trying to make money in our state.” Robbins said. “If people are looking to move or move business to Illinois, someone’s going to advise them not to move here because of these taxes.”

Huntley, too, may feel the effects of the new law. One of Huntley’s goals this year is to attract new businesses and corporations to the village. Village Manager Dave Johnson said the tax hike will make those efforts harder.

The village will now face more competition attracting businesses from nearby Wisconsin and Indiana, where the taxes are lower, Johnson said.  Even offering tax incentives may not be enough to combat the new tax, he said.

For now, Huntley just has to continue to plug along and let corporations know the village is open for business, he said.

Pam Cumpata, president of the McHenry County EDC (Economic Development Corporation), said she hasn’t heard of any businesses being recruited by Indiana or Wisconsin yet, but the governors of both states have said they will go after Illinois business.

“The state of Illinois has assets that other parts of the country don’t have. We have an international airport, an attractive region, good educational institutions and hospitals,” Cumpata said. A major function of the McHenry County EDC is to attract businesses to the area. Cumpata said the tax hike makes that work more challenging.

McHenry County state legislators were among the minority voting against a hefty tax hike, aimed at bailing the state out of its budget crisis.

“I think we should be proud of the fact that every state official from McHenry voted ‘no,’“ Cumpata said.

“I believe that businesses understand the state needs to pay its bills, but I think individuals and businesses are looking to the state to make adjustments to spending, just like they have to,” Cumpata said.

State Sen. Pamela Althoff, 32nd district, said her phones were ringing all day with calls from families and businesses in McHenry County. She said she had so many e-mails, her computer froze.

“One of the reasons it’s so difficult for my constituents to swallow is that they pay far more across the board. The collar counties send, by far, more money to Springfield and get far less services,” Althoff said.

Athoff said most state dollars go to Chicago and downstate.

Althoff was among Republicans urging the state to find the money elsewhere.

“We need to look at all the issues and figure out where we can save. The state can either reduce programs or reduce the number of people who are allowed access to programs. It is difficult–absolutely,” Althoff said.

She said there are many areas where the state can cutback that, collectively, can make a difference. Possible areas including taxing pensions and doing away with unfunded mandates for schools and local government, Althoff said.

Althoff said she has already supported measures that would reduce the state’s debt, including Medicaid reform and repealing the state’s death penalty, which would save money spent on litigation. She said death row litigation costs the state $120 million per year.

Althoff said many people believe the tax hike will ensure programs are maintained, but she points out, the tax increase is to pay off $13 billion in debt.

Althoff’s vote on last week was among the minority in the Illinois Senate; the group approved the measure by a vote of 30 to 29.  The Illinois House signed off on the tax increase last Tuesday.

The tax increases are large, but they aren’t permanent. The plan is paired with a strict two percent cap on spending growth. If state officials spend more than that, the tax increase will be canceled. Even if officials stay within their spending means, income taxes will drop back down to four percent in 2015.

Barrington Patch Local Editor Morgan Delack contributed to this story.