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Today’s numbers

Tuesday, Feb 4, 2014

* From COGFA’s newly released study of business tax incentives

According to the latest information from the Comptroller’s Tax Expenditure Report, businesses in Illinois benefited from over $1.15 billion business related tax expenditures.

* The largest tax expenditures reported in the FY 2012 issue were:

    1. Sales Tax Expenditures:
    * Manufacturing and Assembling Machinery and Equipment Exemption ($183 M)
    * Retailer’s Discount ($121 M)
    * Rolling Stock Exemption ($74 M)
    2. Corporate Income Tax Expenditures:
    * Illinois Net Operating Loss Deduction ($219 M)
    3. Other Tax Expenditures:
    * Sales for Use Other than in Motor Vehicles Exemption ($116 M)

According to a Department of Revenue report, in 2012, Enterprise Zone, High Impact Business, and River Edge Redevelopment Zone tax incentives resulted in the State foregoing approximately $115 million in tax revenue.

In the aggregate, businesses receiving tax incentives reported creating 4,671 jobs and investing approximately $3.7 billion in 2012

- Posted by Rich Miller        

13 Comments
  1. - archimedes - Tuesday, Feb 4, 14 @ 9:18 am:

    Hmm. I know the tax incentives are over time, some credit for past and some intended to spur the future on. But, just dividing the incentive into the jobs is a cost of $246,000 per job….


  2. - Bill White - Tuesday, Feb 4, 14 @ 9:25 am:

    This paragraph jumped out at me as being rather candid:

    === This unfortunately leaves lawmakers, in a time of struggling budgetary conditions where additional jobs are needed, the unenviable task of deciding which tax incentive is important enough to keep, which new tax incentives should be offered, and which incentive can be sacrificed as a target of much-needed revenues for the State. And this all must be done with limited available information to make these decisions. ===


  3. - Commander Norton - Tuesday, Feb 4, 14 @ 9:28 am:

    It should go without saying but probably still needs to be said anyway - correlation does not imply causation.

    Just because businesses receiving tax incentives invested $3.7 billion in the state does not mean that they would not have invested so much or created so many jobs had they not received those incentives. The key question is, to what extent did incentives spur investment, hiring and growth that would not have occurred without them? Since businesses are always daring the state to call their bluff, I’m guessing there’s no real way to know.


  4. - Bill White - Tuesday, Feb 4, 14 @ 9:37 am:

    I’ve been skimming the entire report and I think there is a tremendous amount of useful information here.

    One point that should also be stressed is that economic development should also be measured by comparing metropolitan regions rather than states. From the perspective of economic geography state lines can be artificial constructs.


  5. - Liandro - Tuesday, Feb 4, 14 @ 9:44 am:

    My math also comes to about $246,200/job, although as said that should be spread out over multiple years assuming they are permanent or semi-permanent jobs.

    Commander Norton’s question is very pertinent, then: how much of that $3.17 billion re-investment was impacted by the tax breaks? Probably a good chunk, but I agree that it would probably be hard to tell. It would certainly vary from company to company. An aggressively growth-oriented company would put all of it towards re-investment, but most would probably split between de-leveraging and growth, with some possibly just hording. Some of those tax breaks, though, come in the middle of expanding.


  6. - Formerly Known As... - Tuesday, Feb 4, 14 @ 9:52 am:

    @archimedes - I will gladly contribute to Illinois’ economic recovery and help provide taxpayer relief by accepting a job at “only” half that price. Let’s say $123,000 plus benefits, of course.

    Anyone else want in on this? It’s for the good of the state.


  7. - Right Field - Tuesday, Feb 4, 14 @ 10:16 am:

    Hate to go down this road, but what jobs weren’t lost as a result of the expenditures? It’s not a one-sided equation.


  8. - Liandro - Tuesday, Feb 4, 14 @ 10:41 am:

    @Formerly Known As…

    Sure, for one year. If the job stays for seven years, you’re only making $35,171.43/year, and that doesn’t count anything that was spent on capitol improvements and other growth. I’m not defending all the credits, just pointing out that taking a one-year view is far too simplistic. When a business expands, they’re biting off a multi-year (multi-decade?) commitment.


  9. - Formerly Known As... - Tuesday, Feb 4, 14 @ 10:55 am:

    @Liandro - I would actually take things one step further and add in the costs of overhead, utilities, support staff and so on during those several years.

    It is a decidedly more complex equation than simply a one-year proposition - even those these numbers represent the cost of one year of these tax incentives.

    It is also decidedly apparent that my snark ain’t what it used to be.


  10. - Liandro - Tuesday, Feb 4, 14 @ 10:58 am:

    Lol, I agree that the $246,200 number hit me as large. One wonders how many of those are actually effective at promoting hiring/growth, and how many are just lining pockets? It’s a lot of cash, but it’s a big state, too.


  11. - DuPage - Tuesday, Feb 4, 14 @ 1:57 pm:

    These sort of numbers can be misleading. Exemptions for example, state and local governmental agencies are exempt from a lot of state taxes. Those state trucks plowing the snow, have state plates that are basically free. That comes up to millions of dollars, on paper. In reality, having the state pay the state for license plates every year would actually cost the state money for all the paperwork, for a zero gain on the bottom line.


  12. - 4 percent - Tuesday, Feb 4, 14 @ 2:46 pm:

    I’m seeing alot of confusing math. $115 million divided by 4671 jobs is $24,619 per job (not $246,000). Plus they invested $3.7 billion in capital infrastructure. So I’m sure there is sales tax, property taxes and employment taxes along with income taxes paid by the employees.


  13. - Smitty Irving - Tuesday, Feb 4, 14 @ 4:21 pm:

    When a Governor introduces a budget, it should include “tax expenditures” by category and recipient (above a certain amount - I don’t need to know each mortgage deduction, etc.). What is the difference between a direct subsidy that generates a payment from the State and a tax deduction / tax credit? Other than the deduction / credit is now hidden from public view.


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