Strong Illinois economy has been very good for business

Don’t tell the naysayers, but Illinois’ economy continues to remain strong.

We are America’s sixth-largest state and fifth-largest economy, now generating $1.1 trillion annually — more than 13 other states combined.

Indeed, according to data from the Bureau of Economic Analysis, Illinois’ economy has expanded by $217 billion over the past five years. That’s more than all the goods and services produced every year in North Dakota, South Dakota, and Alaska combined. Put simply, our businesses, workers, residents, and visitors have added the equivalent of three states to our economy in just five years.

What is helping to fuel the growth? Two big factors have been a surge in new businesses starting up, and an even greater expansion in business profits.

According to U.S. Census Bureau data, new business applications expanded by 46% between 2019 and 2023. And Illinois Department of Revenue tax statistics show rising annual profits at Illinois’ businesses over this same period, with corporate profits growing by 142% and profits at “pass-through” small businesses rising by 215%.

But there are undoubtedly other factors at play. For example, on its “Top States for Business” list, CNBC now ranks Illinois second for infrastructure, second for education, sixth for access to capital and ninth in cost of living. Site Selection Magazine ranks Illinois second in corporate investments and second in the number of corporate projects per capita.

Yet for years, Illinois’ naysayers have argued that the state’s business-friendliness was lacking. The data shows that claims of state policies being at odds with business growth have been unfounded. Look no further than the fact that the profits of Illinois’ small businesses have tripled and those of corporations have more than doubled since Gov. J.B. Pritzker has been in office.

In other words, Illinois not only is open for business, but it remains a state where businesses can thrive.

This robust economic growth has significantly improved Illinois’ fiscal outlook, as well. Our businesses and corporations contributed nearly $6 billion more in income taxes in 2023 than they did in 2019, helping to balance the budget, pay down pension debts, and increase investments in education — further improving investor confidence and brightening our long-term economic prospects.

But there still exists an opportunity to do more and maximize the economic return for everyday residents and middle-class taxpayers. While strong wage growth has been in the news both nationally and in many parts of Illinois, the inflationary hangover from pandemic-related supply chain disruptions has hit working families especially hard.

And while research shows the increases in the minimum wage, historic investments in infrastructure, and constitutional protections of bargaining rights for workers will yield important gains in this regard, there are a few other proposals on the table in the legislature that would provide some additional relief and are worth highlighting.

For example, one recent report has shown that adopting a Child Tax Credit would lower taxes for working families who need it most, create thousands of jobs and boost the economy. A $300 to $1,200 credit per child would reduce child poverty by 3% to 14%. And it could be paid for with just a small fraction of the increase in tax revenue from the rise in corporate profits.

Similarly, a paid family and medical leave law could be a pro-family, pro-business policy change. Studies show paid leave boosts labor force participation among mothers and reduces turnover costs for businesses. One report found it could boost worker earnings in Illinois by $1.4 billion annually.

Illinois finally has been able to get back on its feet after years of fiscal mismanagement. Now, with record-high profits from businesses, Illinois can afford to enact policies that invest in working families and in attracting more people — more workers, more entrepreneurs, and more taxpayers — to our great state.

• Frank Manzo IV is an economist at the nonpartisan Illinois Economic Policy Institute.