Tax Impact on Business Relocation

David Gordon Posted On January 26, 2011

With the stroke of a tax pen, will businesses migrate?

On January 13, 2011 Illinois Gov. Pat Quinn signed a tax bill that effectively raises personal and business taxes on all that live in the state. What was the old 3% rate is now a 5% rate. Businesses will now see a 50% increase in their tax rate to 7%. In addition, businesses pay a 2.5 % personal property replacement tax. The way that adds up now is that almost $1 of every $10 dollars a company earns heads to the state coffers, instead of into it’s business for redevelopment and growth.

The broader question is “Will rising tax rates encourage, or force, manufacturing and or other businesses to move their locations? Or does it deter business growth and thus send jobs else where?”

Three states that have always led the way with state income taxes appear to be using increased taxes as a way of covering their current spending and budget requirements. It makes us wonder if, as a business community, we have reached a tipping point when it comes to taxes. For example, California basically taxes its citizens personally at a rate of 9.4%. Corporate tax is 8.84%.

New York taxes is at a rate of 6.85% with a graduated tax for earners above $200,000. Corporate income tax is 7.1%.

Illinois will now have 5% income tax and a corporate tax of 7% plus 2.5% personal property replacement tax. They say it will be temporary until 2025 (anyone want to place a bet!)

As an Illinois politician put it when the ‘Temporary’ Tax bill was signed: “Here’s an investment tip: Put a lot of money into moving vans.”

Did CED have enough of the California tax/spend drama to move their corporate headquarters to Irving Texas?

The real question might be: “When will businesses start to relocate when tax increases can’t be passed along in the form of price increases that make a company less competitive?” And will there be a flee to the south where tax rates are lower? And could this reduce construction investments in these areas, hence reducing electrical material expenditures and therefore the value of independent local distributors?

So what do you think?

Anonymous

January 27, 2011 at 2:57 pm

We’ve started our plant relocations from Ill and CA last year. Taxes and business regulations have been driving us nuts for sometime.
Politicians, Government entities and Unions have no idea how business is conducted. They all have their hand out.
Common sense regulation (if there is such a thing)is needed. But for Government entities to raise taxes and not stop senseless spending is crazy. This needless spending has been going for a long time and we’ve had enough.

Anonymous

January 27, 2011 at 9:15 pm

I think we figured that out several years ago. We moved from ‘up east’ to warmer climate with no state income tax.
It was like we got a raise.

Anonymous

February 9, 2011 at 5:27 pm

Lot’s of luck on that being temporary tax.

Tax Impact on Business Relocation

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David Gordon

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