Illinois’ corporate tax already too high, but Springfield pushes for more

If Illinois state lawmakers follow the Chicago Teachers Union’s push for a 7.92% base corporate tax rate, it can severely hurt Illinois’ competitiveness. Job creators do not need another reason to abandon Illinois.

Illinois already burdens businesses with the third-highest corporate income tax rate in the country, has persistently high unemployment and sluggish economic growth, so a corporate tax hike is the last thing the state needs.

But that is exactly what is being pushed in Springfield in the final days of the legislative session.  The Chicago Teachers Union is pushing for over $7.3 billion in new taxes. One proposal includes changing the base corporate income tax from 7% to 7.92%, the highest rate permitted without affecting personal income taxes under Illinois law. That would push the effective rate to 10.42% including the 2.5% property replacement tax. This would raise $830 million in short-run revenue.

Illinois already levies an effective corporate tax rate of 9.5%, third only to Minnesota and New Jersey. With the new tax rate, Illinois would jump to second.

These taxes stifle economic growth as they reduce funds businesses can invest in research and development, hiring or expansion. Numerous studies have backed this. Research from the Organization for Economic Co-operation and Development has stated “corporate income taxes appear to be the least attractive choice from the perspective of raising GDP.”

The National Bureau of Economic Research has highlighted the particularly strong effect of corporate income taxes on economic recovery. Its study suggests a 1% cut in corporate taxes leads to a 0.2% rise in employment and a 0.3% rise in wage income.

These effects are especially relevant in Illinois, which continues to lag the nation. The state has the seventh-highest unemployment rate at 4.8%. It has seen a mere 5.7% increase in gross domestic product from 2019 to 2024 compared with 12.1% in national growth. Illinois has only added 9,200 jobs, while states such as North Carolina, which has significantly lowered corporate tax rates, has added 46 times more jobs.

Raising taxes on employers now would deepen Illinois’ economic woes. Instead, the state should focus on responsible long-term reform that reins in spending and creates an environment in which businesses can thrive. That is the path to a stronger economy, a more stable future and healthy revenue growth for the state.