{"id":85109,"date":"2020-02-25T10:17:09","date_gmt":"2020-02-25T16:17:09","guid":{"rendered":"https:\/\/news.medill.northwestern.edu\/chicago\/?p=85109"},"modified":"2020-02-25T10:24:40","modified_gmt":"2020-02-25T16:24:40","slug":"high-illinois-taxes-wages-may-drive-out-business","status":"publish","type":"post","link":"https:\/\/news.medill.northwestern.edu\/chicago\/high-illinois-taxes-wages-may-drive-out-business\/","title":{"rendered":"High Illinois taxes drive out business"},"content":{"rendered":"

By Jackson Elliott<\/strong>
\nMedill Reports <\/em><\/p>\n

Scott Schnurr wanted to buy a fully equipped 30,100 square-foot building in the Chicago suburb of Naperville, but high property taxes convinced him to look for real estate elsewhere.<\/p>\n

The building had stood empty for two years. If not for the taxes, it could have housed a hundred jobs for Schnurr\u2019s water heater installation company, DRF Trusted Property Solutions.<\/p>\n

The property taxes on the building were around fifty thousand dollars. \u201cOn a 10% profit, I\u2019d have to do five hundred thousand dollars of business just to pay the taxes to be there,\u201d the chief executive said.<\/p>\n

Schnurr said he planned to open a call center in Indiana instead because of the state\u2019s tax incentives. \u201cWe went through the process to see if Illinois would match things to keep the jobs there, but Illinois said no,\u201d he said.<\/p>\n

Illinois is home to the city of Chicago, the largest population in the Midwest, stellar colleges, a world-class airport and a location that connects the nation\u2019s east-west rail lines. But businesses are leaving the state because of its high taxes, rising minimum wage and expensive regulations.<\/p>\n

The state is the 6th biggest state in terms of population, but it ranked 31st in total employment growth in the first quarter of 2019, according to the Bureau of Labor statistics. Neighboring Indiana achieved nearly three times Illinois\u2019 job growth with a little more than half its population.<\/p>\n

For some businesses, income taxes and a high minimum wage can be the decisive factor that persuades them to leave Illinois despite its advantages as a transportation and population hub.<\/p>\n

Illinois Manufacturers\u2019 Association CEO Mark Denzler said that if Governor J.B. Pritzker\u2019s proposed progressive income tax passes voters in November 2020, Illinois will have the third-highest corporate tax rate in the country and the second-highest property tax rate in the country.<\/p>\n

\u201cRaising income taxes is not going to attract jobs and investment to Illinois,\u201d he said. \u201cIt\u2019s going to drive job creators away.\u201d<\/p>\n

In a press conference announcing the proposed new tax, Pritzker said that \u201cInstituting a fair tax as I\u2019ve proposed will improve the arc of our state\u2019s finances forever and will make our state more fair for everyone.\u201d<\/p>\n

Imperial Shoe Crafters owner and founder Mercedes Chaca said high taxes affect people who start businesses, and she faces business challenges that Pritzker does not face. The billionaire governor inherited his money from his family\u2019s Hyatt Hotel chain.<\/p>\n

\u201cWhen you already have money there\u2019s nothing that is difficult for you, but when you\u2019re starting, you have to look around and see what you can do,\u201d she said in Spanish. \u201cI think it\u2019s a little bit different from people that have money and people who just started a business because of their own work.\u201d<\/p>\n

Denzler said that the state\u2019s planned minimum wage increase from $8.25 to $15 an hour by 2025 will also persuade businesses to leave. The average minimum wage in the states surrounding Illinois is $7.52, half of what Illinois law would demand.<\/p>\n

\u201cAsk any business if they can work with an 82% increase in labor cost, the answer\u2019s going to be no,\u201d he said.<\/p>\n

The 82% increase from the present minimum wage doesn\u2019t just affect the lowest-paid workers, Denzler said. Skilled employees, who currently make $15 an hour or more, will demand payment above the new minimum wage. To make up for the higher labor costs, businesses may have to raise prices for consumers.<\/p>\n

\u201cTwo thirds of our population live within 45 minutes of a border. If it\u2019s substantially higher, people will go across borders,\u201d he said. \u201cPeople do that all the time. People vote with their feet.\u201d<\/p>\n

In Quincy, residents regularly cross the border to Missouri to buy gasoline, cigarettes and alcohol because of the lower tax, Denzler said. When a flood in 1993 cut off the city\u2019s bridges, sales tax revenue doubled.<\/p>\n

\u201cIllinois has so many things going for it,\u201d Denzler said, adding that the higher taxes earn the state less money. \u201cWe are so well-positioned to be an economic engine not only for the Midwest but for the United States.\u201d<\/p>\n

High workers\u2019 compensation laws also make Illinois less attractive for businesses. When workers get injured on the job, Illinois companies have to pay more to compensate them.<\/p>\n

\u201cThe claimant is going to get two-thirds more settlement in Illinois versus Indiana,\u201d said insurance broker Bill Owens, founder of The Owens Group. \u201cYou wonder why people are moving to Indiana? It\u2019s because of the tort limitation, it\u2019s because of the work comp laws.\u201d<\/p>\n

For instance, an Indiana train derailment that killed seven people in 1993 cost the train\u2019s owners around $2.2 million because of tort limitations in the state, he said. In Illinois, a similar accident cost nearly $100 million.<\/p>\n

\u201cWe are a legal mess here. People need to come together and address these problems, and leadership needs to step up,\u201d Owens said.<\/p>\n

Photo at top: Although Chicago provides many advantages for businesses, its high taxes and extensive regulations drive many entrepreneurs into Indiana. Image: The Chicago River flows through the heart of the city. (Jackson Elliott\/MEDILL).<\/div>\n","protected":false},"excerpt":{"rendered":"

By Jackson Elliott Medill Reports Scott Schnurr wanted to buy a fully equipped 30,100 square-foot building in the Chicago suburb of Naperville, but high property taxes convinced him to look for real estate elsewhere. The building had stood empty for two years. 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