A proposal that the Chamber helped defeat last year has been reincarnated into another bill. HB 4293 (Rep. Welch) would impose a massive 400% tax increase on Illinois’ vital financial services. In today’s interconnected world, billions of dollars travel across the globe in less than seconds. Welch’s proposal would put Illinois’ vital financial service sector and the tens of thousands of jobs it employs at risk by imposing a new 20% tax on partnerships and S corps engaged in the business of conducting investment management services.
Illinois is home to many investment partnerships. If this tax were adopted, Illinois could likely see part of its financial sector leave for other states where taxes would be far lower. If Illinois taxes on such income were to increase, this form of private investment would shrink, and many Illinois businesses would lose access to capital and expertise. Start-ups continually face shortages of capital, and raising taxes on investment management services provided to Illinois based start-ups would reduce investment options for private companies, innovators and small firms getting off the ground. Not to mention, the tax will likely be subjected to a constitutional challenge as an improper second income tax, or a tax that violates the uniformity clause of the Illinois Constitutional by unreasonably signaling out a particular industry.
For the reasons stated above, the Chamber is opposed to this proposal. HB 4293 is posted for a committee hearing in the House next week. The Chamber stands ready to testify in opposition.