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Cat again complains about Illinois business climate

Thursday, Dec 1, 2011

* I can’t say as I blame the company for its disgust with the state legislative process. Cat pushed hard for the reinstatement of the research and development tax credit, which is only $25 million, yet is quite valuable to a state with several pharmaceutical and manufacturing headquarters

Caterpillar spokesman Jim Dugan said he saw some irony in the fact that “a week or two ago we see the state quoted as saying they’re interested in” in working with Cat to bring the new plant slated for the continent to the Land of Lincoln - with the 1,000 or so jobs expected to come with it - but then lawmakers reject the measure containing the tax credit that Cat hoped to receive.

“Contrasted with this expressed desire to have businesses grow here, to locate here, (this) is a disconnect that is unexplainable,” he said.

However, Dugan said a decision on the siting is not linked to the R&D tax credit, and in fact involves reviewing a number of criteria. A number of different locations within the U.S., as well as in Canada and Mexico, will potentially be vying for the plant, with a decision on the location expected by the end of the year.

Inaction on the tax credit “is an example of a much, much broader, deeper, fundamental issue and problem” for the state, Dugan said. “We have a state that’s clearly lost without a rudder in the midst of a company like Caterpillar with 23,000 employees in Illinois.”

The problem, Dugan said, is that “there’s no long-term stability” or predictability in state policy for the company to depend upon.

No argument here.

The R&D tax credit should never have been allowed to expire in the first place. And if an agreement on a broader tax package can’t be reached, it ought to be revived on its own.

And maybe that’s what the GA needs to do with the rest of the tax cuts anyway. Allow members to submit amendments and vote on these tax cuts individually, perhaps during a Committee of the Whole. There’s an agreement on the Sears tax break, so that may pass. The Democrats can pass the EITC proposal. Just about everybody would vote for R&D. And that Chicago theater tax break will probably die. The CME deal would be an interesting debate in and of itself. I’d like to see it.

* By the way, Chiquita is leaving Ohio, so you can bet that Ohio will be pushing hard on its $400 million relocation offer to Sears

On Tuesday, Chiquita accepted a $22 million in tax incentives from North Carolina to move its world headquarters from Cincinnati to Charlotte.

“It hurts to lose yes. Especially when we are losing nearly 400 jobs,” said Cincinnati councilwoman Cecil Thomas.

“It’s disappointing for your city and it’s a loss income tax wise as well,” said Cincinnati councilman Chris Bortz.

Nearly 375 jobs will be transferred from Ohio to North Carolina by 2014. Chiquita executives have contemplated the move since September.

Sears may or may not be a dying company, but they are our dying company and their state tax break is pretty small in comparison to the overall budget.

- Posted by Rich Miller        


23 Comments
  1. - walkinfool - Thursday, Dec 1, 11 @ 11:09 am:

    I agree with Dugan, it’s not the tax itself which bothers most big dcompanies in Illinois. It’s the unpredictability, and inability to depend on a given state position when planning.

    Exactly the same thing is happening nationally: it wasn’t so much the size of the debt which caused our rating downgrade, (as explained by the rating agencies themselves), but the inability of our Congress to move forward on any plan whatever. Strict ideologues, resisting compromise at all levels, are killing us.


  2. - How Ironic - Thursday, Dec 1, 11 @ 11:11 am:

    I’m tired of the tax incentive ‘games’ corporations are playing. Being held hostage to demands to either cut taxs or leave is baloney. The sooner cities and states realize this a losing proposition, the better.


  3. - wordslinger - Thursday, Dec 1, 11 @ 11:18 am:

    In lieu of a thoughtful and comprehensive review of tax restructuring, whacking up these individual deals is not a bad idea.

    I think CATs complaint is a little overstated, particularly in their case. They don’t pay much, if any, state income tax now.

    That’s pretty predictable.


  4. - Pot calling kettle - Thursday, Dec 1, 11 @ 11:20 am:

    I second HI’s comment but I do not think the race to the bottom will end anytime soon. Politicians love to show their skills landing “jobs” for their state, even when the proposition is a net loser. It seems the press rarely digs deep enough to provide a clear explanation to the public on the costs vs the benefits of some of these deals.


  5. - OneMan - Thursday, Dec 1, 11 @ 12:09 pm:

    Yeah Sears may be our dying company but if Ohio is going to offer them $400 Million they should take it.

    Still think the idea of them trying to do a HQ move with all the other issues they are facing right now is idiotic.


  6. - Plutocrat03 - Thursday, Dec 1, 11 @ 12:29 pm:

    “trying to do a HQ move with all the other issues they are facing right now is idiotic.”

    No more idiotic than United moving into the city from the suburbs while reorganizing.


  7. - Rich Miller - Thursday, Dec 1, 11 @ 12:32 pm:

    Plutocrat03 is exactly right. And who can blame a cash-starved company for being lured by $400 million?


  8. - Observer - Thursday, Dec 1, 11 @ 12:49 pm:

    Maybe they should not have imposed that tax hike. Seriously, and dont bombard me with partial statistics, Illinois is over regulated and over taxed


  9. - Cook County Commoner - Thursday, Dec 1, 11 @ 12:53 pm:

    As the owner of some CAT stock, I wrote the company expressing my preference that new facilities go to Mexico, even with all its drug problems. That way it would be closer to the likely future development in Mexico and Central, South America. Illinois and most of the rest of the states just won’t face up to their fiscal problems. Who cares if CAT doesn’t pay any taxes when its Illinois employees and surrounding communities begin to degrade with increasing speed? Absent some unprecedented government epiphany, my vote is anywhere but Illinois.


  10. - wordslinger - Thursday, Dec 1, 11 @ 1:00 pm:

    CCC, so you prefer the good government and well-managed state of affairs in Mexico? That’s incredible.

    Some people just really hate this place. Why on earth do you stay? It’s quite a mobile society.


  11. - Small Town Liberal - Thursday, Dec 1, 11 @ 1:04 pm:

    - Seriously, and dont bombard me with partial statistics, Illinois is over regulated and over taxed -

    Kind of ignoring the plank in your eye there, aren’t you? The tax increase has nothing to do with Sears, the massive tax credit they’ve received for more a decade expiring is what’s driving their threats. But please, feel free to continue bombarding us with partial thoughts.


  12. - he's right - Thursday, Dec 1, 11 @ 1:11 pm:

    Beijing is much more predicatble.


  13. - MidGround - Thursday, Dec 1, 11 @ 1:21 pm:

    Talk about speaking out of bothsides of your mouth!

    Cat profits up 90 percent

    October 25, 2011

    Caterpillar has reported a 44 percent jump in revenues for the nine months to the end of September and a record third quarter.

    Nine month revenues were $42.9 billion - 44 percent up on the same time last year, while new machine sales increased 45 percent to $40.8 billion. Sales growth has come from all regions, but Europe and Asia lead the way at 51 and 55 percent respectively. Pre-Tax profits were up 90 percent to $4.75 billion.

    The third quarter saw revenue growth continue at similar levels, with total sales up 41 percent to $15.7 billion and new machines sales up 444 percent to $15,6 billion. Pre–tax profits grew by more than 47 percent to $1.63 billion.

    Caterpillar chief executive Doug Oberhelman said: “I am pleased with how we’re performing. This was the best quarter for sales in our history, and our order backlog is at an all-time high. Excluding Bucyrus impacts, this was also our best profit quarter in history, and year-to-date operating profit as a percent of sales was higher than any full year in more than three decades. Machinery and Power Systems operating cash flow has also been very positive, with the first nine months of the year better than any full year in our history,”


  14. - Rich Miller - Thursday, Dec 1, 11 @ 1:33 pm:

    ===As the owner of some CAT stock, I wrote the company expressing my preference that new facilities go to Mexico===

    I wish we could deport you as well. Seriously, are you a complete idiot?


  15. - Fed up - Thursday, Dec 1, 11 @ 1:33 pm:

    Illinois government isn’t just dysfunctional it’s also corrupt. No way cat brings a new plant to Illinois. Sears is dying not much future in that badly managed company. In some ways Illinois future is much like sears. Very bleak. Can’t blame CME for leaving the tax structure screws them but I still think giving the millionaires at CME a tax break using 95 million of pension money is wrong and disgusting. We can’t keep destroying the middle class to appease the millionaires


  16. - wordslinger - Thursday, Dec 1, 11 @ 1:43 pm:

    –Illinois government isn’t just dysfunctional it’s also corrupt. No way cat brings a new plant to Illinois.–

    CAT has plants in noted pure and goo-goo locations including Brazil, India, Indonesia, Italy, Mexico, Northern Ireland, Russia and China.

    I know some people dig the self-flagellation, but c’mon.


  17. - western illinois - Thursday, Dec 1, 11 @ 3:18 pm:

    China and Mexico have no corruption and wonder ful rule of law …gee give me a break. BTW Cat is adding jobs in Illinois.
    I really dont mind giving RD or manufacturing credits or some to Sears but forget 400 million. Its the CME that gets me outraged especially since they were supposed to be regulating MF Global while 1.2 billion in supposedly separate accounts dissappeared ….Why dont we just get real and leaglize all gambling but make them call it Gambling instead of “financial services”


  18. - JP - Thursday, Dec 1, 11 @ 3:23 pm:

    “I think CATs complaint is a little overstated, particularly in their case. They don’t pay much, if any, state income tax now” ??

    CAT has 23,000 employees in Illinois. Let’s say conservatively they get paid $50,000 each per year. At 5% State Income Tax, that is $57 Million in State Income tax before CAT can makes one dime in profit in Illinois.

    Move to a State without Income Tax, and $57 Million goes to the bottom line.

    JBP


  19. - Rich Miller - Thursday, Dec 1, 11 @ 3:29 pm:

    JP, that comes out of the employee salaries, not out of Cat’s bottom line. Sheesh.


  20. - JP - Thursday, Dec 1, 11 @ 4:06 pm:

    cat writes the check, not the employees. they don’t write the check if there is no income tax.


  21. - Small Town Liberal - Thursday, Dec 1, 11 @ 4:24 pm:

    - cat writes the check, not the employees. they don’t write the check if there is no income tax. -
    So you’re assumption is that all those employees will just be ok with the deduction from their paycheck normally labeled “State Income Tax” being relabeled “Bottom Line”? Somehow I think they may get some questions…


  22. - Observer - Thursday, Dec 1, 11 @ 9:09 pm:

    My guess is most of those employees only lok at what their net pay is and have no idea how it is derived.
    I heard some one the other day going on about being put in a higher Illinois tax bracket…when Illinois has a flat tax.
    CAT would take the tax breaks and the employees wouldnt know anything about it


  23. - wishbone - Thursday, Dec 1, 11 @ 11:40 pm:

    “The sooner cities and states realize this a losing proposition, the better.”

    Amen, amen, amen!


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