* I’ve seen more than a little misinformation about the leaked letter by Caterpillar’s CEO and chairman revealing that he’s being intensely wooed out of state. I told subscribers about it this morning, but figured I should probably post some of that here since things got kinda outta hand in comments while I was gone.
First, this stuff about how the recent tax hike will cost Caterpillar $40 million comes from an ABC7 story linked in my absence…
Caterpillar also says the tax hike will cost them $40 million.
Not true. They got that number from a Wall Street Journal story…
The Illinois tax increase will cost Caterpillar’s 23,000 employees in the state about $40 million this year, said Jim Dugan, the company’s chief spokesman. Higher taxes make it harder for Caterpillar to attract and retain engineers, accountants and other employees, Mr. Dugan said. He added that Caterpillar’s corporate taxes in the state also will increase but provided no estimate on the added cost.
So, this was about personal income taxes, not corporate. As you might remember, I linked to a story several years ago about how Caterpillar had managed to avoid paying state corporate income taxes…
The Citizens for Tax Justice study found Boeing did not pay income taxes to any state during two of the three years studied, 2001 to 2003. During the two years in which Boeing did not pay state corporate income taxes, the company turned a combined profit of $3.1 billion, McIntyre said.
Other profitable Illinois-based corporations such as Caterpillar, Tribune Co., Sears and Sara Lee successfully avoided paying any state’s corporate income taxes during at least one year of the period studied by Citizens for Tax Justice.
Although tax returns for companies, as well as individuals, are private, the institute was able to determine whether companies were able to avoid state taxes by analyzing documents publicly traded companies must file with the Securities Exchange Commission.
* The Engineering News-Record took a look at the letter in a far less freaked out way than most local outlets….
“You’ve always been honest with me, and that’s why I want you to know about these letters,” [Cat CEO Doug Oberhelman] says to Quinn. “I’m not sending them to you as a threat that Caterpillar is leaving Illinois…I’d like to invest more here…but as the leader of this business, I have to do what’s right for Caterpillar.”
Oberhelman goes on to say that “the direction that this state is headed in is not favorable for business, and I’d like to work with you to change that.”
Caterpillar executives are chiefly concerned about lawmakers’ ability to balance the state budget, reduce state spending, create new workers’ compensation reform and renew a research-and-development tax credit. But so far, Cat has no plans to move.
“Again, we have not said we are looking to relocate,” Jim Dugan, Caterpillar spokesman, told ENR in an e-mail exchange. “We are looking to help Illinois to become more competitive for all businesses.” [Emphasis added.]
There are serious problems here, for sure. Workers’ comp reform talks are proceeding, but things aren’t going well, as subscribers know. The R&D tax credit Cat has will undoubtedly be renewed, as will others, especially now that the letter has been sent.
* All that being said, Cat is definitely looking elsewhere to build new plants. Here are just a few stories…
* Dec 18, 2008: Cat announces new plant in Texas - Company spokesman says plan is not related to decision to lay off Mossville workers
* January 5, 2009: Caterpillar plant, 600 jobs bound for North Little Rock
* Jul 30, 2010: Cat announces new North Carolina plant - 850,000-square-foot facility will be used for axle assemblies
* October, 2010: Caterpillar Selects Victoria, TX, For New Hydraulic Excavator Facility
It’s more than obvious that we’re losing out to other states.
* But the hyperventilating from politicians about this letter is getting to be a bit much. For instance…
Illinois Congressman Aaron Schock denounced Gov. Pat Quinn on Tuesday after Quinn dimissed the possibility of Peoria’s Caterpillar Tractor leaving the state because of high taxes.
The Peoria congressman told Don Wade and Roma that Quinn is “out of touch” and his “idiotic policies” could cost the state a Fortune 15 company.
“For the governor of the state of Illinois to scoff and laugh, that is very, very dangerous and it shows a level of naivety, that is indicative of a governor that is out of touch,” Schock said.
Quinn didn’t “scoff and laugh.” Listen for yourself…
In fact, Quinn is being presented with an award by the Caterpillar CEO next month in Peoria. The two obviously have a decent relationship, as evidenced by the “You’ve always been honest with me” comment in Oberhelman’s letter.
“I like to work with all the executives but the notion of leaving Illinois is not a good idea. We’ve had great companies like Ford, Chrysler, Navistar, and Boeing all come here with more manufacturing. They understand we have a good workforce, and if you have a government who wants to work with you, you’ll go pretty far.”
Again, no scoffing and laughing there.
* The first thing that came to my mind during my break, once the shock of seeing the blaring headlines wore off a bit, was that Gov. Quinn really needs to tone down the rhetoric and get to work on our problems and forget about everybody else’s. He’s upset about what happened in Wisconsin. Fine. We get it. But he’s running around the country like Mother Jones singing “Solidarity Forever” at the drop of a red hat. That sort of defiant, pro-union attitude won’t go over well with corporate types.
This is a centrist state, something that Quinn may not fully comprehend. He didn’t squeak by Bill Brady because he was so liberal. Quinn beat Brady because Brady was far more Right than Quinn was Left. The governor would do well to move to the center.
And while I don’t agree with Congressman Schock about the tone of Quinn’s response to the Cat letter, the governor should’ve sounded far more concerned. At least for appearance’s sake, for crying out loud. Show that you’re on it, man. Get busy. Lead.
* Also, while he’s at it, Quinn should check into this…
Modern Drop Forge Co. of southwest suburban Blue Island said Monday it expects to ship one of its two Illinois plants to Indiana, taking 250 Chicago area jobs with it. The 97-year-old company makes automotive, truck and recreational equipment parts.
“Illinois is becoming very, very unfriendly to manufacturers,” company CEO Pat Thompson told CBS 2.
Thompson cites not only the corporate income tax hike approved last year, but other state tax laws, workmen’s comp rules and prevailing wages.
“We now have just about the highest state income tax in the United States, and the overall income taxes for corporations in Illinois are amongst the highest in the free world,” he said.
Illinois has lost hundreds of thousands of manufacturing jobs in the last decade. We can’t do a whole lot about China and Mexico, but we can and should attempt to compete far better with neighboring states. Workers’ comp absolutely must be reformed, for instance.
* And speaking of neighbors…
Less than four months after losing nearly all of an $810 million grant, Wisconsin is again seeking federal high-speed rail money - this time to upgrade the existing Milwaukee-to-Chicago passenger line.
Gov. Scott Walker’s administration announced Tuesday that the state will seek at least $150 million to add equipment and facilities for Amtrak’s Hiawatha line. […]
In a bizarre twist, some of the money that Walker is now seeking originally was allocated for the Milwaukee-to-Madison route he previously turned down. That money is available because a fellow Republican governor rejected it, as well. […]
The state’s share of the cost of the maintenance building will be $12 million.
Walker earlier rejected a much larger rail project which would’ve cost the state about $4.7 million a year.
* Caterpillar letter may trigger workers’ comp overhaul
* Cat CEO letter a wake-up call for Quinn, state
* What is Caterpillar trying to tell Illinois?: One is that the company wasn’t threatening as much as trying to send a message: Big segments of the business community think Illinois has become a terrible place to start or run a business. Two: Though we can disagree on details and solutions, we ought to listen to the message, because it contains much truth.
* Illlinois delays college construction projects
* Neb. governor tries to entice Caterpillar to move
* Wisconsin reaches out to Caterpillar
* Sen. LaHood: Caterpillar Letter is an Opportunity