Illinois needs spending restraint to help businesses thrive in 2026
The Illinois General Assembly has returned for the 2026 session, and lawmakers already are debating subsidizing the Chicago Bears’ new stadium, making changes to Tier 2 pensions, addressing energy concerns and data centers, and even proposing new progressive income taxes.
Lawmakers face a clear choice: continue down a path of wasteful spending and higher taxes or finally do right by the taxpayers and businesses that fuel the state’s economy.
Last year’s budget offered little reassurance to employers already struggling under Illinois’ high tax burden. Lawmakers approved millions for questionable priorities, including $7 million of “pork” in the budget to relocate pigs at the University of Illinois and more than $1 million for projects aimed at “reimagining capitalism.” These line items might do favors to constituents in lawmakers’ districts, but they do nothing to help small businesses keep their doors open or expand payrolls.
Such spending excesses are not isolated. They are symptoms of a broader problem with Illinois leaders’ approach to fiscal matters.
Since 2018, Illinois’ economy has grown just 7.4%, one of the slowest rates in the nation and less than half as fast as the U.S. economy’s 18%. During the same period, the state budget has ballooned by more than 36%, nearly five times faster.
When government spending consistently outpaces the private economy, it crowds out investment, dampens job creation and puts pressure on lawmakers to raise taxes. Illinois already has seen at least 49 tax hikes since 2019, many of which directly target employers. Gas taxes were doubled and indexed to inflation. The franchise tax repeal was halted. Retailers’ discounts for collecting sales taxes were capped, effectively raising taxes on brick-and-mortar businesses.
The result is a state that talks about economic development while driving away employers and residents. Illinois already has among the highest corporate tax rates in the country. Layering complexity and uncertainty on top of that has only worsened its competitive position.
Despite this track record, some lawmakers are again floating sweeping tax increases in 2026. House Speaker Chris Welch recently raised ideas for imposing new “millionaire taxes,” former Gov. Pat Quinn is pursuing a voter referendum to adopt a similar surcharge and Illinois lawmakers filed a bill last year to adopt a graduated income tax.
Voters rejected Gov. JB Pritzker’s progressive income tax amendment just five years ago, and polls consistently show little appetite for giving lawmakers greater power to tax retirees, family farms and small businesses. Yet, lawmakers continue to push the same policies to fund a budget projected to grow another 16% by 2030.
That approach would be especially damaging for businesses. Many small businesses and independent contractors pay taxes through the individual income tax system. A graduated tax structure would give politicians wide latitude to shift rates, making it easier to target these employers whenever Springfield overspends.
Instead of reaching deeper into taxpayers’ pockets, lawmakers should focus on reforms that help businesses grow while restoring their own fiscal discipline. One clear step would be to finally phase out the franchise tax, a levy on a business’ net worth that punishes companies simply for operating in Illinois. Ending it would send a strong signal that the state wants to be competitive again.
Lawmakers should also adopt a spending cap tied to economic growth. If Illinois’ budget had grown at the same pace as the economy since 2018, it would be roughly $9 billion smaller today. A cap would protect taxpayers from runaway spending while forcing legislators to confront long-standing problems, such as pension costs and inefficient programs, rather than masking them with new taxes.
Beyond taxes and spending, policymakers should pursue reforms that expand opportunity. Creating apprenticeship pathways to occupational licensing would help workers enter fields without unnecessary barriers. Reviewing and sunsetting outdated licensing requirements would reduce costs for entrepreneurs trying to start or grow a business.
As lawmakers debate pensions, football stadium subsidies, taxes and new programs in 2026, they should remember that sustainable growth comes from the private sector. It does not come from ever-expanding government budgets.
If Illinois wants a stronger economy, lawmakers must stop punishing the very businesses that make growth possible and start governing with discipline and common sense.
• Matt Paprocki is the president and CEO of the Illinois Policy Institute.