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IMA Alert: Governor Pritzker Releases $3.4 Billion Graduated Tax Plan

Governor JB Pritzker publicly unveiled his graduated income tax proposal that will increase the corporate income tax by 13.5 percent while spiking the tax rate for many small businesses by 60.6 percent. This “jobs tax” will generate $3.4 billion according to the Governor’s estimation. If enacted, Illinois will have the 3rd highest corporate tax rate (10.45 percent) in the United States, trailing only Iowa (12 percent) and New Jersey (11.5 percent). However, Iowa’s top rate is scheduled to drop to 9.8 percent in 2021. Under the Pritzker tax hike, corporate tax rates will be 10.45 percent (7.95 percent plus the 2.5 percent corporate personal property replacement tax) while many small businesses will pay a rate of 9.45 percent (7.95 percent plus 1.5 percent corporate personal property replacement tax).Illinois’ top individual tax rate would be the 8th highest nationally.More than 75 percent of Illinois businesses file taxes under the individual income tax rate such as Subchapter S corporations, partnerships, and LLCs. The Governor’s proposed rates are as follows: 

Income                                   Tax Rate

$0 – $10,000                           4.75 percent

$10,001 – $100,000               4.90 percent

$100,001 – $250,000             4.95 percent  

$250,001 – $500,000             7.75 percent

$500,001 – $1,000,000          7.85 percent

$1,000,001 or more              7.95 percent *

Once income reaches $1 million, the entire income is taxed at the 7.95 percent. Employers with more than $1 million will see the entire amount taxed at the maximum rate plus the CPPRT. Manufacturer A (Subchapter S) that has $2 million in income will see the tax bill increase from $129,000 to $189,000. Manufacturer B (C Corporation) with $5 million in income will see the tax bill jump from $475,000 to $522,500. Manufacturer C (Subchapter S) with $300,000 in income will have its income tax bill increase from $14,850 to $16,185, an increase of 9 percent. In an attempt to address the skyrocketing cost of property taxes, the Governor is proposing to increase the current property tax credit from 5 percent to 6 percent. However, this credit is only available to taxpayers with incomes of $500,000 or less (married filing jointly) or $250,000 (single). In total, the Governor is offering only $100 million in property tax relief in exchange for $3.4 billion in higher income taxes. Additionally, the Governor is proposing to add a new $100 per child tax credit that will only be available for joint filers ($100,000 or less) and single filers ($80,000 or less). However, the small credit starts phasing out at $60,000 and $40,000 respectively. The IMA is leading the fight against the new jobs tax on Illinois businesses and families. More information about how you can help is coming soon.