“Fair Tax” Could Extend Some Relief to Illinois’ Small Businesses

fair taxThe effects of the 2008 economic downturn can still be seen throughout the state of Illinois. No sector has been as toughly hit as local area small businesses. However, progressive tax amendments proposed in Illinois could have wide reaching implications, that could even decrease small businesses tax liability. Many believe that these progressive tax amendments will actually assist local Illinois small businesses, while others beg to differ. Our small business law attorneys are observing the evolution of the proposed progressive tax amendments, as well as the potential negative and positive effects that it could have on Illinois area small businesses.

The Progressive Tax Amendments

Presented by Senator Don Harmon of Oak Park, a new tax rate structure has been introduced that proposes providing a 94 percent tax cut for Illinois taxpayers who make around $204,000 or less a year. Dubbed a “fair tax,” the new structure actually serves to extend additional tax relief to small business owners because the adjusted gross income of over 90 percent of local small businesses is $200,000 a year or less. This means that many small business owners would be covered under the tax break provided for those who make around $204,000 a year or less. After being rejected by the Illinois House Committee, the proposed tax amendments have been endorsed by a key Illinois subcommittee. The Senate Executive Committee voted at the beginning of April to include the constitutional amendments to the Illinois tax structure on the fall voting ballot.

Will New Progressive Tax Rates Actually Help Small Businesses?

The exact annual income cutoff rate for eligibility to take the proposed tax cut has yet to be specifically determined. However, debate is already brewing about whether the newly proposed tax rate will actually produce lasting benefits for local small businesses. Some people believe that there need to be changes to Illinois property tax rates, and not the income tax rates in order to provide relief for local small businesses. This is because studies have shown that corporate income tax accounts for only around eight percent of a business’ financial burden in Illinois, while the burden of property taxes makes up for almost 40 percent of taxes paid by Illinois businesses. However, support for the progressive tax cuts comes from the belief that the potential tax breaks that average citizens would experience would put more money in their pockets, which would then be used at small businesses throughout the state, thus leading to a possible profit boost for businesses in all of Illinois. The tax breaks that qualifying small business owners would receive would also spur new job creation and investment in Illinois.

Potential public voting for the proposed amendments to Illinois’ current tax structure would not occur until the fall, and the amendments still needs to pass approval in the full Illinois Senate following legislative consideration. Contact the small business law attorneys here at The Gierach Law Firm in Naperville, Illinois for information about any tax breaks or other potential benefits that small business owners should be aware of.