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A Progressive Tax Will Doom Illinois Small Businesses

Posted on Monday, October 19, 2020
by Outside Contributor

taxOwning a small business should be a labor of love, but too often the city of Chicago turns it into a daily grind. I should know — in the 1990s I owned and operated a Play It Again Sports franchise on Irving Park Road just west of Lincoln Avenue. I also owned a store in Skokie and had a third territory ready to develop on the Northwest Side.

My work gave me purpose. I was building a business based upon a simple concept: Serve customers well. To do that, we needed great people on our team. I worked hard to identify talent and reward hard work, knowing full well that by investing in our team, I was investing in our community. I was lucky to have so many employees that made work joyful.

In fact, one of work’s greatest joys was helping other people build better lives for themselves. One such example was a recent immigrant who showed up every day asking for a job. He got his chance when another employee called off sick and we faced a must-make delivery: He stayed for years, made the business a brighter place and his work put three daughters through college.

Despite this success, I learned firsthand how government can get in the way of a person’s hopes and dreams.

By the mid-1990s, I was ready to expand to my third location, a new store at Irving Park Road and Harlem Avenue on the Northwest Side. I had been paying about $22,000 a year in property taxes at my Chicago location as part of my lease agreement. Then I received a letter from the landlord informing me that my share of the property taxes had increased to a shocking $90,000 a year. We appealed, but nothing happened.

The worst part was feeling powerless to do anything. I re-examined whether I wanted to take such a risk when my business was subject to the whims of a government that could raise taxes whenever it wanted.

25 years later I find myself fighting the same fight, this time on behalf of thousands of small business owners and their workers who find themselves in the same place my team and I were in back then.

Illinois governor J.B. Pritzker campaigned on a promise to undo our state’s longstanding flat tax protection, and has put $56.5 million from his own pocket into his “fair tax” campaign. An amendment before voters on November 3 would allow state lawmakers to add as many state income tax brackets as they wish. Indeed, some in the administration are already signaling that they are interested in starting to tax retirement income.

While all taxpayers are at risk once Illinois state lawmakers can divide taxpayers without facing pushback from constituents, the insidious part is the progressive tax would kick small businesses and our economy as we struggle to recover from the COVID-19 pandemic. Economists roundly warn against adding taxes during a recession. In Illinois, small businesses are responsible for 3 out of every 5 net jobs created. Small-business owners have also suffered the most during the economic fallout from COVID-19.

State lawmakers already passed initial progressive rates in case they win voters’ approval. The hit to over 100,000 small businesses in Illinois will be up to a 47 percent tax increase.

And that’s just the damage so far.

No one in Illinois really believes the same legislators who haven’t balanced a budget in 20 years and ran up a $140 billion pension deficit are going to stop at rates that “tax the rich” yet only give the state’s poorest enough of a break for a fast-food meal. More than half of progressive-tax states hit the middle class with the same top rates paid by millionaires, and there’s every indication that will happen in financial basket-case Illinois.

When small businesses face a tax hike, they’re left with less money to spend on new locations, new workers, new equipment, and improved employee training. It also means less for current workers’ raises.

It’s already hard to make a business succeed here in Illinois, especially if you’re a small start-up without the resources of a big corporation. The progressive tax would make it even harder.

Risk is expected by those who choose to run a small business. They choose that life because they assess the risks and decide that the services they can offer their neighbors, and the jobs and revenue they can generate for their communities are well worth it. They decide that providing the opportunity for others to send their three daughters to college is worth it.

Politicians should not be allowed to add to those risks by implementing unpredictable tax policy that gives too much power to state lawmakers who cannot control their own spending.

No one running a small business expects to get rich, but they do expect to be treated fairly. The so-called fair tax is as unfair as it could be, to the small business owners, to their employees and to their customers. It’s time to tell Springfield “no” to a tax hike. It’s time to give small businesses a break.

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