Tax Foundation Says Graduated Tax Will Hurt Small Business

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State Capitol – A graduated income tax could sock small business owners in Illinois.

That’s the finding of the Washington based Tax Foundation.  Pitched as a way to cut taxes to 99.3% of all Illinois taxpayers the Tax Foundation says small business owners could see income tax rates as high as 11.25%.

“The small business income is going to be subject to these new much higher rates that puts Illinois in a much less competitive place,” according to Jared Walczak, Policy Analyst for the Tax Foundation.  Walczak told reporters at the Illinois State Capitol only California and New York City would have higher tax rates.

The Democratic controlled legislature is proposing changing the states income tax system from the current flat tax to a graduated tax with four tax brackets.  It will require a change to the state constitution along with approval from voters.

“I’m disappointed that outsiders from Washington, DC have arrived in our state to scare legislators and voters about the Fair Tax proposal.  If they would have taken the time to fully understand the bill they would know that 99% of Illinois families and over 90% of small businesses would get a tax cut,” said Kristen Crowell, Executive Director of Citizens for Tax Reform.

The Tax Foundation publishes a State Business Tax Climate Index.  It says Illinois’ business taxes place it 23rd in the nation.  If the graduated tax is implemented the state would fall to 48th.

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