Illinois businesses groups raise concerns over decoupling proposal

(The Center Square) – Gov. J.B. Pritzker’s attempt to eliminate tax benefits for business losses through the CARES Act failed, but some are worried he may try again in the next legislative session.

The governor was hoping to “decouple” the state tax code from a recent federal change to lower tax liabilities to businesses suffering during the pandemic, saying it would save the state $500 million during a budget crisis.

“That would essentially deprive Illinois of revenues that it otherwise should get and it’s literally a technical fix,” Pritzker said.

The state budget is $4 billion out of balance. The governor revised the gap after voters rejected the graduated income tax amendment in November. Pritzker’s budget was banking on the passage of the amendment and on the federal government sending direct payments to state coffers, both of which never materialized.

The plan has drawn opposition from at least twelve business groups as burdening them with a tax hike as they struggled through a pandemic. One of them is the Illinois Fuel and Retail Association. CEO Josh Sharp said it is not the time to eliminate tax breaks.

“If they want to really, truly try to work out way out of this crisis, we have to do a couple of things, and one is to have a real discussion about the spending that we do and how we are going to fund it,” Sharp said.

Other groups opposing the move included the Illinois Chamber of Commerce, Illinois Manufacturer’s Association, and the Illinois Hotel and Lodging Association.

“We urge the Governor and legislature to reject this massive tax increase at a time when thousands of small businesses across the entire state are struggling to stay afloat during a pandemic and government-imposed shutdowns,” the group said in a statement. “This will have a dramatic impact on every aspect of business, including some of our most decimated industries. We understand the desire to find revenue, but this is the opposite of an ‘all-in’ approach.”

The decoupling bill only received 50 votes early Wednesday, but needed 60 to pass. Sharp is worried Pritzker may try again, which he said, could be the final dagger for some Illinois businesses.

“There are many that are just operating right now on a limited amount of revenue,” Sharp said. “They have depleted their savings and they don’t have a lot left to give, and if the state decouples from the feds and ultimately makes their Illinois tax bill that much bigger, then yes, I can see some folks who are right on the edge may be closing up shop and shutting down.”

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