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1 Joseph Henchman, Sensibly Reforming the Tax Structure and Tax Incentive Policies of Illinois 1 (2014)

handle is hein.taxfoundation/taxfaape0001 and id is 1 raw text is: Sensibly Reforming the Tax Structure and Tax Incentive Policies of Illinois Joseph Henchman Vice President for Legal er State Projects, Tax Foundation Testimony before the Revenue & Finance Committee and the State Government Administration Committee of the Illinois House of Representatives January 17, 2014 Good morning, and thank you for the opportunity to appear today. My name is Joseph Henchman, and I am Vice President for State Projects at the Tax Foundation. We're an independent tax policy research organization based in Washington, DC. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at all levels of government. Our Center for State Tax Policy analyzes state tax trends from a national perspective, and provides tools to compare state tax systems with each other. One of these tools is our annual State Business Tax Climate Index. The Index compares state tax structures on over 100 different variables important to business climate, job creation, and economic growth in the areas of individual income tax, corporate income tax, sales tax, property taxes, and unemployment insurance taxes. If you were to get all of the nation's state tax experts in one room and ask them what good policy is, the answer you'd get from 9 out of 10 of them is four words: Broad Bases, Low Rates. In many ways, Illinois does precisely the opposite. The state sales tax is one of the narrowest in the country-exempting many goods and services-but the rate is among the highest. Property taxes are high. And the corporate income tax rate is among the highest in the world. Faced with this uncompetitive rate, companies take and seek the incentives to reduce their tax costs. There are three types of tax incentives: (1) those required by the inherent structure of the tax system to prevent double-taxation, like the credit for taxes paid to another state; (2) social policy tax provisions, like child tax credits or the EITC, and (3) incentives to encourage certain business activity, like R&D credits or targeted incentive packages. 1

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