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Lawmakers: Business taxes need repair

CHICAGO — Less than a year after increasing Illinois' corporate income tax rate, lawmakers are taking on the state's business tax code.

By Benjamin Yount

CHICAGO — Less than a year after increasing Illinois' corporate income tax rate, lawmakers are taking on the state's business tax code.

The first of four hearings brought lawmakers, business leaders and Gov. Pat Quinn's administration together Tuesday in Chicago.

State Rep John Bradley, D-Marion, who is overseeing the hearings for the House, said Illinois has long been called "bad for business."

"We know that we have issues. We know that the corporate tax system has been problematic," Bradley said. "We're going to attempt to look at it and come up with comprehensive solutions."

Bradley and other lawmakers would not say if one of those solutions would be to lower the corporate income tax rate. In January, Illinois' corporate tax rate jumped more than 45 percent, from 4.8 percent to 7 percent. Instead, Bradley said he supported a "revenue neutral" solution.

But, Brian Hamer, director of the state Department of Revenue, said lowering the corporate tax rate is not the answer, because Illinois' tax code is complicated and cannot simply be compared on a state-by-state basis. He added that the impact of Illinois' taxes vary greatly.

"We did a significant study of the Fortune 100 a number of years ago, and at the time, we saw that about a third of those large, generally highly profitable businesses paid no state income taxes," Hamer said. "We're in the midst of a new study, also looking at the Fortune 100, and we're finding that quite a proportion of the group continues to pay no tax."

However, Mark Denzler, vice president of the Illinois Manufacturers Association, which represents thousands of manufacturing businesses and lobbies state government, said businesses in Illinois are suffering, in part, because of the government of Illinois.

"We've seen an income tax increase, a proposed gross receipts tax, an attempt this year to repeal every tax incentive," Denzler said. "The Department of Revenue is three years behind in paying corporate tax refunds. We face an $80 billion liability in pensions, and about a $6 billion short-term operating deficit."

Denzler said Illinois' financial woes and instability have created a negative climate for business. He said he doubts that if the current problems continue, Illinois will ever make good on the promise to roll back the income tax increase in four years.

State Rep. David Harris, R-Arlington Heights, agreed, saying, "From my perspective taxes are disincentives. And a business that finds itself paying too much (in taxes) will look elsewhere."

But state Sen. Toi Hutchinson, D-Olympia Fields, said the state needs the tax revenue to serve its constituency and she hopes the hearings produce a balanced, new tax policy.

"Balance the need to fund our government to the level that people expect, while we create a competitive tax code that attracts and retains business."

Lawmakers are expected to hear from business leaders Aug. 2 in Rockford. Hearings also are scheduled for Marion in southern Illinois and at the statehouse in Springfield later this year.

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