A TAXING SITUATION

When it comes to having the credentials to understand taxes, CPA Linda Forman is up there with the best. She is past vice-president and board member of the Illinois CPA Society and currently sits on the Regulation and Legislation Committee as well as several other committees. She is Chair of the National Association of Women Business Owners (NAWBO) Advisory Board (Chicago Chapter), and Executive Committee member and is the group’s treasurer. She is an independent voter who supports quality politicians, so she has no particular biased political agenda.

When she told me that she had thoughts about corporate taxes in Illinois, it made sense to let her write about it because she knows a lot more about it than I do. Below is what she wrote, followed by my Q&A.

A tax solution for Illinois by Linda Forman

Did you know that corporate taxes account for a small percentage of Illinois’ revenue? Individual income tax and sales/use tax are the bulk of tax revenue. Just ask any Illinois business about the unfriendly Illinois taxes and fees – and this was before the corporate income/replacement tax rate was recently raised to almost 10%. Overtaxing business is NOT the way to improve the bottom line of Illinois’ income, especially if that business has options to relocate.

If you could have more people working in Illinois and spending money here, the tax revenue would increase a lot faster than by burdening companies that could have employed these people. So how would this happen?

Here is what I told Gov. Quinn two weeks before the election when the National Association of Women Business Owners – Chicago PAC Governing Board met with him.

If we planned a business friendly Illinois with a 5-year timetable to eliminate corporate income tax, we would give businesses a chance to plan expansion or relocation to Illinois.

The ripple effect of a business friendly Illinois would increase individual and sales/use tax revenue, cut unemployment costs and make Illinois the jewel of the Midwest. We have an excellent location, good centralized transportation and great educational and cultural institutions. If we didn’t burden businesses with a ton of fees and taxes, Illinois would be the go-to place to locate.


People may object that business would be getting off easy while the average Joe or Jane has income tax to pay. But look at the states that have little or no business taxes. These states have attracted significant businesses and expanded others. THIS TRANSLATES TO JOBS AND BENEFITS with the large companies and the smaller businesses that offer support services and accommodations.

Our biggest hurdle with this plan is for businesses to believe that Illinois will keep its word in 5 years. That would require legislative action and support from the leaders who “control” the House and Senate – and a vision to make Illinois a premier business state. It would also require a firm commitment to deal with the deficit. It is time to stop posturing and playing partisan games – we have a serious fiscal problem in Illinois and must deal with it NOW.


Wise leaders would understand that this plan would be their legacy to reshape Illinois. It is a no-brainer action that would bring a new day to Illinois.

Q&A

You say you told Quinn your idea two weeks before the election. How did he answer?

He said it was true that we did not get much revenue from business and we both recalled the surtax concept of the past that generated revenue on a temporary basis. As is his habit, he noted the ideas presented on small pieces of paper that he brings back to his office to share with staff.

Do you have any financial's to compare Illinois to what other states charge for corporate taxes?

Here are the tax rates of our neighbors, per the Tax Foundation (2010)


Indiana 8.5%


Iowa 6 - 12% (brackets - not a flat rate)


Michigan 4.95%


Wisconsin 7.9%


Illinois 9.5% - 4th highest in the country

Now look at key states that have attracted business and have NO corporate income tax.


Nevada 0%


Texas 0%


Washington 0%


And I have clients who have relocated to these states to avoid the income/replacement taxes and all of the other taxes that Illinois assesses on business. See the ripple effect.  We all lose when our state is not business friendly.


What is the total Illinois businesses pay now and how many workers would it take paying income tax to make up the difference?

I don't have such numbers at the ready, but can cite an example. Salaries are a significant cost of business and profits don't generally come close to the total amount of salaries paid. So if a company expanded in Illinois and made an extra million dollars in profit, at the old 7.3% rate, the tax paid would have been $73,000. That same company may have an increase in payroll of $8 million. At an average rate (after exemptions and credits) of 2%, the revenue generated would be $160,000, over twice as much as the corporate tax. These same new hires will be buying products that generate sales tax revenue - and also expanding the business volume of companies who provide services and products and food. The ripple effect is often estimated in significant multiples by economists - so there would be further income and sales tax gracing the coffers of Illinois.


Remember we would need MORE income tax to replace what business currently pay in corporate tax because if there are more people living in Illinois there would be more students for schools, more police needed etc. How would that be possible?


There would be much greater revenue with the increase in income and sales tax. More business equals more travel and entertainment expenses. Take areas with major malls - Woodfield Mall and Old Orchard Shopping Center throw off a very large amount of sales tax revenue - resulting in lower real estate taxes, better parks and schools.

Linda Forman can be reached at LformanCPA@aol.com or by phone at 847-316-1040.