A bill that would impose a job tax on Illinois employers and employees was assigned to the Senate Executive Committee on January 27.

The proposal, SB 2413 (Villivalam), would impose a job (or payroll) tax on Illinois workers and employers to fund a state-run paid-leave program.

The proposed tax increase runs contrary to messaging from legislative leaders that the General Assembly will focus on “affordability” this spring.

“Illinois small businesses and working families have been hit hard by inflation and rising energy prices,” said NFIB Illinois State Director Noah Finley. “The last thing they need is Springfield taking another cut of their hard-earned money. The General Assembly should be working to make Illinois more affordable for hard-working Illinoisans, not grasping for more money.”

The legislation would put in place a payroll tax of 1.12% that would go into effect on January 1, 2027.

• Initially, employees would pay 40% of the payroll tax, and employers with 25 or more employees would pay the remaining 60%.
• Beginning January 1, 2029, all employers would be required to pay 60% of the payroll tax.

The payroll tax percentage could fluctuate based on the program’s spending, but in the proposal, it is capped at 1.25% of wages.

Minnesota passed a similar proposal in 2023 and—even before the program had gone into effect—the state increased the payroll tax on Minnesota jobs beyond its original projection.

Under SB 2413, employees would be eligible for up to 18 weeks of paid family and medical leave per year. In addition to the 18 weeks, employees would be eligible to take an additional 9 weeks of paid leave for pregnancy-related issues.

Authorized reasons for leave include:

• Personal-health issues
• Physical or psychological care of a family member
• Birth, adoption, or placement of a child
• Pregnancy-related issues
• Personal or family member’s experience of domestic or sexual violence

The program would pay individuals 90% of their average weekly benefit rate up to $1,200 during authorized leave. The maximum payment rate would be adjusted every year to match Illinois’ weekly wage rate.

The payroll tax would not be assessed on the first $15,000 in income or on income above $352,200 (or “2 times the Social Security contribution and benefit base…whichever is greater”).