Good for Business: How Illinois Can Best Support Small Business


April 7, 2014

Given the sluggish job growth during the recovery that has followed the Great Recession, decision makers both nationally and here in Illinois have indicated an interest in pursuing policy initiatives that will help spur the economy. Many have identified supporting small businesses and entrepreneurship as key to this effort. While various regulatory, spending and other policies (e.g. grants, technical assistance, incubators, and technology transfers) can directly and/or indirectly impact small businesses, the primary policy tools available fall into two distinct categories. On the one hand, policymakers can opt to reduce business and/or individual taxes in the hope that the tax relief will incentivize hiring and business expansion. Indeed, the Speaker of the House recently introduced a bill to reduce the state’s corporate income tax to stimulate job growth.

On the other hand, policymakers can make adequate investments in core public services and goods that businesses need to thrive, like education and infrastructure. Of the two primary policy tools available, the evidence overwhelmingly indicates that the latter approach is the best choice for supporting small businesses.

Knowing that the evidence shows business tax relief is not the best approach to stimulating the economy is one thing. What is crucial is that policymakers actually use this knowledge to craft effective, long-term solutions to one of the most challenging problems facing Illinois today—effectively stimulating the economy while dealing with the state’s fiscal shortcomings. After all, the state has an accumulated deficit of at least $7.6 billion in its General Fund budget for FY2014, the current fiscal year. This accumulated deficit is a very real problem that constrains the state’s ability to make the very investments in education and infrastructure that are so crucial to small businesses.

This Report highlights the best practices and policy initiatives decision makers could take to support small businesses in Illinois.  

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Topics:Tax and Budget, Illinois Budget, Income Tax, Revenue Policy, Workforce/Economic Development, Economic Development

Tags:Corporate Income Tax, Small Business, Personal Income Tax, Graduated Income Tax, Entrepreneurial Activity, Business Taxes