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.
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.