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The state's leading manufacturing group said it's on the defensive in Illinois, but plans to push for policies that it can get through the Democrat-controlled legislature.
Governor J.B. Pritzker encouraged more innovation and creation in Illinois to grow the state's manufacturing base at the mHUB Manufacturing Industry Celebration last week in Chicago.
“We all know that manufacturing is changing,” Pritzker said. “Supporting innovators and the small businesses that power our economy is one of my top priorities as governor. I like to say it’s my job to help a thousand flowers bloom in the state of Illinois, I’d like to say 10,000 flowers.”
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Illinois Manufacturers’ Association President and CEO Mark Denzler said Tuesday that manufacturers feel like they are on the defensive in Illinois because of a number of mandates and regulations in energy policy, labor law and the state's minimum wage increase.
“The graduated income tax, I’ve heard from a number of our member companies that is going to substantially increase costs,” Denzler said. “We are looking at some energy legislation, and when you talk about manufacturing what are the three biggest costs? Personnel, energy and, often times, taxes.”
Pritzker has proposed changing the state’s flat income tax to a tiered structure that taxes higher incomes at higher rates. In promoting his progressive tax in Belleville on Monday Pritzker said it’s fair to have businesses pay an estimated $3.4 billion more under his proposed tax plan.
Denzler said a progressive income tax will push costs even higher for businesses, especially when including the personal property replacement tax, or PPRT, pushing the rates to as high as 9.45 percent.
“When you’re looking at these tax calculators out there, they don’t properly reflect [PPRT] for the business community, nor do they reflect the property tax,” Denzler said.
Pritzker’s plan would give property owners a 20 percent credit for property taxes, but Denzler said businesses would still grapple with the second-highest property taxes in the country. Illinois also has higher workers' compensation costs than other states.
“All of these things add up and the more costs you impose on manufacturers, the less likely they are to expand or do business in Illinois,” Denzler said.
Lowering the cost of workers’ compensation isn't on the Illinois Manufacturers’ Association list of legislative priorities this year. In previous years, the group has worked to try to lower the cost of workers’ compensation for businesses. The group has said the state's workers’ compensation costs are the highest in the midwest and an impediment to attracting new employers, or expansion investment of employers already in Illinois.
“There are interest groups that have no interest in working on this,” Denzler said. “I just don’t think we’re going to have any action in the House and Senate so we’re trying to focus on things where I think we can have movement this year.”
Instead, Denzler said the group is focused on a variety of other areas. He laid out a series of bills on Tuesday that manufacturers will be promoting this year.
Among those are Senate Bill 1930, which would waive tuition and fees for students studying science, technology, engineering or math if they agree to teach in Illinois schools. That measure could be voted on in the Senate as early as this week.
Senate Bill 216 would help manufacturers develop their own workforce through apprenticeship programs with a “small tax credit equal to qualified education expense for apprentices.” That bill, with bipartisan support, is in a subcommittee that could be heard this week.
There are also measures to make permanent the research and development tax credit (House Bill 3411/Senate Bill 1905) and manufacturer’s purchase credit (HB2300/SB1390).
Another measure IMA calls small business regulatory tax relief (HB3721/SB1648) would allow employers to pay unemployment insurance taxes quarterly, instead of all at once in the first quarter of the year. Paying all at once creates “a cash flow concern for small employers,” the group said.
Another measure Denzler said the group has worked with unions on focuses on critical infrastructure protection. HB1633 and SB1304 would increase penalties for individuals who trespass and intentionally damage critical infrastructure facilities such as pipelines. Denzler said this doesn't take away anyone’s right to protest, but it does work to protect infrastructure projects from criminal damage.
Denzler said the state needs to improve the business climate in Illinois.
“You have to do something to stimulate the manufacturing sector or we’re going to see it continue to deteriorate in the state of Illinois,” Denzler said.
“I’m committed to making sure that we have the skilled workforce to will attract 21st-century businesses,” Pritzker said at mHUB Friday. “Whether it’s lifting up the state’s universities or community colleges … helping our brightest students to afford to attend college, or ramping up our career technical education in our high schools, those are all things that are critically important to me.”