Posted January 24, 2017 5:13 pm by Comments (21)

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By: Mark Glennon*

 

The introductory language in the bill is so perfect. The tax is imposed “for the privilege of doing business in the State.”

 

And the rationale for how much tax is paid is pure genius: The more you pay employees in Illinois, the higher your tax. That’s right, it’s based on how big your Illinois payroll is. Whether you have any money, any revenue or any profit doesn’t matter.

 

It’s in SB-9, a bill introduced today in the Illinois Senate. It would apply to pretty much anybody doing business in the state — any individual, association, corporation, LLC, etc., foreign or domestic. The schedule for calculating the tax bill is as follows:

 

(1) if the taxpayer’s total Illinois payroll for the taxable year is less than $100,000, then annual tax is $225;

(2) if the taxpayer’s total Illinois payroll for the taxable year is $100,000 or more but less than $250,000, then the annual tax is $750;

(3) if the taxpayer’s total Illinois payroll for the taxable year is $250,000 or more but less than $500,000, then the annual tax is $3,750;

(4) if the taxpayer’s total Illinois payroll for the taxable year is $500,000 or more but less than $1,500,000, then the annual tax is $7,500; and

(5) if the taxpayer’s total Illinois payroll for the taxable year is $1,500,000 or more, then the annual tax is$15,000.

 

Now, the new tax would replace the existing franchise tax. However, it appears that most employers would end up paying more, depending on their particular circumstances that go into calculation of the franchise tax, such as paid-in capital. Smaller companies currently pay a franchise tax as small as $25 per year if they have minimal paid-in capital.

 

Sen. Toi Hutchinson

Regardless, I can imagine what would go through the mind of a financial officer filling out the annual payment forms, who is probably the same person who helps decide whether to hire more in Illinois versus another state: “What’s wrong with these people? The more we pay our workers the higher our tax?  And they call it the”Business Opportunity Tax”?

 

The bill was filed by Illinois State Senator Toi Hutchinson (D-Olympia Fields). It contains other new taxes under discussion I haven’t had the courage to read through yet. It has the full support of her party.

 

*Mark Glennon is founder of Wirepoints. Opinions expressed are his own.

 

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Crabcakes

if your an employer, simple solution, just pay your workers as contract/ 1099 workers–no tax, no nothing. I was reading that astoundingly, 1/3 of all workers in US are now contract workers–hard to believe!!(but our college grad daughter is one of them), thanks to ACA and so many other regs.

Hoot

No doubt the Chiraq parasites want more blood. Leeches and ticks. Must rid Illinois of this parasite epidemic. NO NEW TAXES can you people not hear or read. Besides getting wealthy for yourselves WHAT good are you?

billiards

The pimp politicians need mo hoes. Pay and obey bitches. Slavery is alive and well in Illinois

jean s

why dont illinois consider building a GIANT PRISON & moving a large portion of their population INTO IT then maybe you can buy a loaf of bread in Chicago w/o being SHOT.

Me

Illinois corruption goes way back. Why is everyone surprised. Wait until Obama gets back there.

the NPP

Why don’t they just tax people who shoot others. You shoot someone, you have to pay $50. You shoot and kill someone, $150. You kill someone without shooting them, $200.
Budget issues in Chicago solved.

What happens to the startup firm that wants to hire people?

JT Boyle
This is outrageous! The average fast food restaurant in Illinois receives approximately $800,000 to $1,000,000 in revenue per year. This would mean that their annual tax increase would be $7500, which equates to almost 1% of their entire gross revenue. The average fast food business also takes in about 5 to 10% operating margin, if they are very efficient and manage costs effectively. So, at this point, the state of Illinois–before they even take their income tax–will lop off 15% of their profit before even getting started. A normal, successful dine-in restaurant in Chicago probably does about $2.5 million to… Read more »
Thomas

I don’t agree with the tax but read it again. It bases your percentage in PAYROLL not totally revenue

JTBoyle

I don’t need to read it again. Restaurant payrolls move almost perfectly with revenue because of the model. It is usually at about 32% of revenue. The vast majority of restaurants will thus fall in the 500k to 1.5mil payroll range and be slapped with the $7500 tax. I can’t put it any simpler than that.

nixit

Mark – The bill states “Qualified business” means an individual, trust, estate, partnership, association, firm, company, corporation, or limited liability company…. Would a labor organization qualify under any of these? That’s what CTU claims on their 990 as “other” and they don’t check corp, trust, or association.

De Franco

Thank God somebody is reading SB-9.

Evan Bour

Yet another reason to move your business to Indiana.
Enough being abused and held back in Illinois

John from Park Forest

Not surprised this comes from Toi. Look at her district– crashing property values,rising unemployment, growing gang and crime problem, local businesses fleeing to Indiana, schools districts a mess, school rankings diving and soaring property taxes. The only industry doing well is movers helping residents and businesses get out of town.

K L

Yup ??

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