Martin Matushek, a co-owner of West Dundee-based M2 Polymer Technologies Inc., sees the writing on the wall for businesses. Growth? More jobs? Here in Illinois? Forget it.
Just as businesses are beginning to recover from the recession, the corporate income tax is expected to increase from 4.8 percent to 7 percent to help stabilize the financially strapped state. Couple that with other taxes on businesses, such as a 2.5 percent corporate personal property replacement tax and the rising minimum wage, and companies will suffer, Matushek and other business leaders said Wednesday.
"We have three employees now, and I was hoping to hire two more, one for customer service and an outside sales person, but not now," said Matushek. He also wrote a letter to Gov. Pat Quinn and other state leaders about the impact on his 11-year-old company, which sells adsorbents and environmental products.
Quinn said Wednesday he will sign the tax hike bill that raises the income taxes for businesses and individuals, to help solve the state's financial crisis.
Matushek is angry that the state hasn't demonstrated deep spending cuts, or other measures such as cutting staff and overhead, freezing wages or capping pensions.
"I'm willing to take some pain for a finite, four years, but they're not addressing anything else to save money," Matushek said.
As if the business climate wasn't caustic enough, the tax burden has angered business owners and consumers alike. Most businesses that have survived the recession now face even less income that otherwise could have been used to grow their businesses.
"The governor's office over reached on this and the Illinois legislature just went along with it," said Doug Whitley, president of the Illinois Chamber of Commerce.
Other states, Whitley said, including Indiana, Iowa and Missouri have lower corporate income taxes and likely will become more attractive than Illinois for those starting new businesses.
"Investors might want to be conscious of these clear, red flags," Whitley said. "Something needs to be done on these issues. Companies probably won't leave wholesale. There won't be any wholesale migration, but these are clear signs that Illinois is an anti-business state."
In fact, Wisconsin Gov. Scott Walker said his state is "open for business. In these challenging economic times while Illinois is raising taxes, we are lowering them."
While Illinois' debt load may compel a tax increase, the state's first step should have been to cut government spending, said George Stenitzer, spokesman for Naperville-based Tellabs Inc.
"Taxpayers and businesses have already learned to do more with less, and government needs to catch up," Stenitzer said. "Tax increases hurt Illinois businesses. What's bad for business is bad for jobs and bad for Illinois."
This tax increase is yet another deterrent to do business here, said Shirlanne Lemm, president of the Greater O'Hare Association.
"It is disappointing, especially when things seemed to be getting better and people were talking more positively about how their business was doing," said Lemm. "With more money going to pay taxes it means less money to hire employees and create jobs. I guess a loss for Illinois is a win for Indiana and Wisconsin."
Other business leaders agreed. It was hard to find someone who didn't.
"Unless our state government comes up with new and/or creative incentives for our local businesses, this tax increase will force businesses to move out of state," said Jim Uszler, CEO and president of the Mount Prospect Chamber of Commerce.
Others questioned how the extra tax money will be spent, since no promises have been made to curb spending, said Jean Gaines, president of the Geneva Chamber of Commerce.
"It seems there is always a loop hole for them to spend it in other ways," Gaines said. "There are real concerns over the corporate income tax increase which will rank Illinois among the highest in the nation. If more corporations move out or fail because of this excessive tax we will not see improvements to the job market. Our membership is comprised of small businesses and this increase will certainly affect them when they are already struggling to stay afloat."
Like Matushek in West Dundee, Shane Beard is the owner of FastSigns in Naperville and hates the new tax, thinks it sends the wrong signal to businesses here and elsewhere, and forces him to "throw his net wider" to get orders to keep his business going. Since he relies heavily on business-to-business orders to make signs, those other businesses around Illinois will be suffering like him.
"I don't like it," Beard said about the tax. "It's the wrong idea and the wrong move. But I won't leave Illinois. I have too many ties here."