What suburban businesses, residents need to know about governor’s budget

Gov. J.B. Pritzker recently touted his fiscal year 2025 budget plan in the annual State of the State address.

Spoiler alert: Pritzker’s $52.7 billion budget, the largest in state history, includes nearly $900 million in tax hikes targeting businesses and residents in Illinois.

Here are the five most important things to watch from Pritzker’s budget that will directly affect suburban job creators, consumers and communities.

• Extending caps on distressed businesses

For starters, Pritzker wants to extend caps on net operating loss deductions through 2027 for struggling businesses. Illinois limited these deductions during COVID-19 to prop up tax revenue as companies lost money. The caps disproportionately will affect businesses still recovering or operating at a loss after the pandemic.

Only two other states cap net operating loss deductions like Illinois does. Our state already has the second-highest corporate tax rate nationwide. Extending caps through 2027 punishes businesses still working to rebound from the pandemic and will slow Illinois’ economic recovery. This is one more hit our business community doesn’t need.

• Increasing sports betting tax

The governor’s budget additionally hikes the sports wagering tax by a staggering 133% overnight — from 15% to 35%. This will make Illinois tied for the fourth-highest rate nationwide. While sports betting taxes currently fund infrastructure projects, Pritzker would divert the estimated $200 million annual increase toward state general spending.

This giant hike strains suburban sportsbooks who expected more predictable taxes on their new investments. It also repels future sports betting operators considering Illinois to expand operations. Our state will lose out on jobs and tax revenue as companies turn away.

• Capping retailer’s discount

The proposed budget also cuts retailers a raw deal through a new cap on the retailer’s discount. This discount lets the state compensate shops for administrative costs incurred collecting and submitting sales taxes on its behalf. Capping the credit would cost retailers up to $186 million annually. From small grocers to big-box giants, stores across Illinois will take a hit.

• Eliminating grocery tax

Local governments also stand to lose from Pritzker’s proposal. While the governor wants praise for eliminating the grocery tax, he fails to provide alternative funding for the $252 million in annual revenues cities and towns will lose. He’s taking credit for a gift that doesn’t affect state budgets.

His budget address altogether ignored that ending the 1% tax on food purchases will create a hole in local budgets. Towns and cities might be forced to raise property taxes to make up for part — but possibly not all — of the shortfall, which will harm residents and job creators alike.

• Eliminating inflation adjustment to standard tax exemption

The governor’s plan also hides a $93 million income tax hike on individuals. Pritzker aims to shortchange the inflation adjustment to the standard tax exemption, resulting in $225 more income becoming taxable per taxpayer and dependent. This increase disproportionately affects lower-income residents.

At the same time Pritzker calls for tax relief through an expanded corporate franchise tax exemption and new child tax credit, he turns around and wipes out any benefit through massive tax hikes on businesses and stealth increases on individuals.

Illinois’ modest improvements to its fiscal health was buoyed by temporary federal aid that also grew spending to unprecedented levels. The state budget has increased by nearly $13 billion since Pritzker took office. Now that it’s run out, Pritzker’s balancing the budget on the backs of recovering suburban businesses and offering “tax relief” by cutting funding sources for local governments.

Lawmakers across the aisle should band together and reject Pritzker’s budget priorities. Illinois must recommit to fiscal responsibility and stay attractive for companies that provide jobs. Only then can the state achieve lasting financial stability without pricing out residents and job creators through more taxes.

• Matt Paprocki is president and CEO of the Illinois Policy Institute.