Needed tax break reform or barrier to growth?
Wednesday, May 14, 2014 - Posted by Rich Miller
* House Speaker Michael Madigan introduced several reforms of Illinois’ EDGE credit today. It was an amendment to HB 3890, which easily passed out of committee. Here’s one of the biggest reform categories…
New Rules for “Special” EDGE Credits — The amendment addresses the special EDGE agreements, which give qualified businesses the option of utilizing their credits earned against the income taxes withheld from their employees. These special agreements have been approved by the General Assembly by law in the past. Going forward, businesses seeking this special treatment from the General Assembly will have to meet higher standards:
- The business must agree to create new jobs — this special treatment will not be available to businesses that are only retaining employees in this state.
- The new jobs must be created in an area of high poverty or high unemployment; “high poverty” means a census tract with over 20% of residents living below the poverty level; “high unemployment” means a census tract where the unemployment rate is more than 3 percentage points above the state average.
- The business must agree to disclose income tax information during the term of its EDGE agreement, including gross income, the amount of income allocated to Illinois, and net income before and after credits are applied. This information will be publicly available on DCEO’s website.
* The Illinois Chamber’s top dog was furious. From the Twitters…
- lake county democrat - Wednesday, May 14, 14 @ 12:00 pm:
Hard to evalute this without knowing how much the state coffers lose to this tax break, let alone whether Whitley is correct about its “detrrance effect” to businesses locating here.
- CircularFiringSquad - Wednesday, May 14, 14 @ 12:01 pm:
Whitley got a little carried away….Good to see Harris and Sullivan not swayed by the biz propoganda
- the Other Anonymous - Wednesday, May 14, 14 @ 12:08 pm:
Interesting. So is Whitley saying that the corporations’ tax returns are so embarassing that they would give up a tax credit rather than make the return public?
And it bears repeating exactly what the special EDGE is: companies want a refund of the amount that is withheld from the employees’ paycheck. It’s the employees’ paycheck that gets reduced by withholding, not the corporation’s profit. Don’t know quite how to justify that kind of tax credit for the corporation.
- Soccermom - Wednesday, May 14, 14 @ 12:20 pm:
I expect this bill will evolve, but I think it’s a good idea to tighten up this program. I am sick and tired of major corporations extorting huge tax breaks from Illinois taxpayers without making real commitments to growth here.
- Yellow Dog Democrat - Wednesday, May 14, 14 @ 12:21 pm:
The tax returns of every single non-profit organization receiving state funds are available on the internet. The returns contain the compensation of CEO’s and other top officers.
If I am Madigan, I would repeat that over and over again.
Kudos to Madigan for stepping into the thorny world of tax expenditures.
Whether it is a nonprofit receiving a traditional grant, or a for-profit receiving a tax expenditure, the public wants a certain level of transparency and accountability.
Not as high as a government agency, perhaps, but some would be nice. Some measurable public benefit would also be nice.
- Soccermom - Wednesday, May 14, 14 @ 12:22 pm:
Sears got an EDGE credit commitment for $150 million, then turned around and closed five stores in Illinois.
http://articles.chicagotribune.com/2013-02-17/business/ct-biz-0217-tax-incentives–20130217_1_tax-credits-tax-filings-income-tax
- Newsclown - Wednesday, May 14, 14 @ 12:38 pm:
If a private company wants public dollars, it has to be accountable to that public, tell me that’s not a surprise. The big problem with such stimulus spending in the past seems like the accountability and transparency were not there, open to public scrutiny. Hey, Doug: you can’t have Falstaff, and have him thin, dig?
For entertaining reading, you might want to google up the horrific mess Caterpillar got into, taking really bad, un-informed advice from their board, expanding into China by buying a hollowed- out Chinese shell company that turned into a multi-billion-dollar sink hole for Cat’s capital. That happened the same year they cut Illinois worker wages/benefit, tried to bully the state into more tax breaks, and cried this state wouldn’t let them be globally competitive.
Amazing how actually seeing the ledgers clears up so much about what really motivates a business decision.
- dupage dan - Wednesday, May 14, 14 @ 12:43 pm:
I could see where a larger corporation may be squeamish about releasing tax info - giving competitors info about your financials and all. It’s not like those non-profits are in the same kind of competition with each other - maybe for grants from the gov’t but not with each other.
Still, Sears getting a grant and then closing stores doesn’t sit well, does it? It makes us look like easy marks.
- Rich Miller - Wednesday, May 14, 14 @ 12:45 pm:
===Sears getting a grant and then closing stores doesn’t sit well, does it? ===
The money wasn’t about its stores, it was about its HQ. Sears closed a whole lot of stores nationwide about that time.
- VanillaMan - Wednesday, May 14, 14 @ 12:47 pm:
It is big world.
Leave Illinois and be successful in it!
That is the message here.
- Ahoy! - Wednesday, May 14, 14 @ 12:54 pm:
It’s not going to be used by many small businesses, too complex and their not going to want all their information posted for public record. The best thing Illinois could do is right it’s financial ship, stop using legislation for politics and start using it for the public purpose and reform workers comp. Reforming workers comp would create more jobs than a tax incentive plan.
- Precinct Captain - Wednesday, May 14, 14 @ 1:02 pm:
==It is big world.
Leave Illinois and be successful in it!
That is the message here.==
It’s charitable to say you’re delusional. Why do you and the Chamber support rent seeking by for-profit corporations on the backs of taxpayers?
- Precinct Captain - Wednesday, May 14, 14 @ 1:05 pm:
==It’s not going to be used by many small businesses, too complex and their not going to want all their information posted for public record. The best thing Illinois could do is right it’s financial ship, stop using legislation for politics and start using it for the public purpose and reform workers comp. Reforming workers comp would create more jobs than a tax incentive plan.==
Small businesses probably aren’t using it now. From DCEO:
http://www.illinois.gov/dceo/Bureaus/BusinessDevelopment/Pages/EDGE.aspx
- Precinct Captain - Wednesday, May 14, 14 @ 1:08 pm:
==It’s not going to be used by many small businesses, too complex and their not going to want all their information posted for public record. The best thing Illinois could do is right it’s financial ship, stop using legislation for politics and start using it for the public purpose and reform workers comp. Reforming workers comp would create more jobs than a tax incentive plan.==
Just about the only way to define a “small business” eligible for EDGE credits now is to look at small manufacturers.
Small business definitions: http://www.sba.gov/content/what-sbas-definition-small-business-concern
Current requirements: http://www.illinois.gov/dceo/Bureaus/BusinessDevelopment/Pages/EDGE.aspx
- Living in Machiaville - Wednesday, May 14, 14 @ 1:12 pm:
The ironic thing with this is that the legislator’s are the ones who were cutting the sweet deals for the BIG BAD companies. No harm in making incentive programs run better but forcing the incentive-takers to put their tax info online will have a chilling effect. Criticize business all you want, just realize the net impact will be that Illinois will effectively be exiting the scene when competing with other states for business attraction and expansion. So no whining allowed as IL falls to the bottom of the economic rock heap.
- Walter Mitty - Wednesday, May 14, 14 @ 1:12 pm:
What am I missing? Madigan giveth and now he taketh away and businesses are the problem? I get the concept. But wether business does or does not take advantage, are we in another dimension?By any measure before this why would you choose Illinois when we are a mess and anti business? It’s the perception… Message delivered…
- A guy... - Wednesday, May 14, 14 @ 1:15 pm:
===Ahoy! - Wednesday, May 14, 14 @ 12:54 pm:
It’s not going to be used by many small businesses, too complex and their not going to want all their information posted for public record. The best thing Illinois could do is right it’s financial ship, stop using legislation for politics and start using it for the public purpose and reform workers comp. Reforming workers comp would create more jobs than a tax incentive plan.===
Amen Ahoy. I’m with Whitley on this one. Small businesses don’t typically want much if anything at all. The more confusing it is, the more hassle. All this infringes on their most valuable commodity which is their time. Small biz take a lot of time out of your life and anything left over is precious. Just filing everything you have to file is a disincentive to hiring people. Workers Comp is a huge monster for small biz. They want to compete. They want to innovate- that’s where their true value is- what they don’t have time for is a convoluted system set up for a place with a department they don’t have. In competition, your business plan and results are confidential. It’s not worth it. Clearly there aren’t small business people crafting this.
- The Doc - Wednesday, May 14, 14 @ 1:17 pm:
==The new jobs must be created in an area of high poverty or high unemployment==
Not sure about this standard. Well intetioned, perhaps, but if an IL company agrees to create new jobs and disclose tax info, restricting their choice of locations within the state seems unnecessarily punitive.
- OneMan - Wednesday, May 14, 14 @ 1:19 pm:
Perhaps a company doesn’t want their financials known in general and there are a lot of good business reasons for this.
You may be investing real heavily in something and may not want your competition to know.
You may not want folks to know your margins, all sorts of stuff…
You could say fine the don’t take state money…
But there is a host of reasons why you wouldn’t want to reveal your tax return besides embarrassment..
- Bill White - Wednesday, May 14, 14 @ 1:19 pm:
All too offer, the same people who assert that corporate tax returns should be confidential are also eager to impose requirements that food stamp recipients take mandatory drug tests.
- Judgment Day (on the road) - Wednesday, May 14, 14 @ 1:30 pm:
“Small businesses don’t typically want much if anything at all. The more confusing it is, the more hassle. All this infringes on their most valuable commodity which is their time. Small biz take a lot of time out of your life and anything left over is precious. Just filing everything you have to file is a disincentive to hiring people. Workers Comp is a huge monster for small biz. They want to compete. They want to innovate- that’s where their true value is- what they don’t have time for is a convoluted system set up for a place with a department they don’t have. In competition, your business plan and results are confidential. It’s not worth it. Clearly there aren’t small business people crafting this.”
I can’t imagine any small business would be interested in an EDGE credit if these changes pass into law.
Under this proposal, the only ‘edge’ would be to your competitors. It’s a proposed law only a bureaucrat could love.
“It is big world.
Leave Illinois and be successful in it!”
Nice and direct. I like that.
- 4 percent - Wednesday, May 14, 14 @ 1:38 pm:
Not focusing on his lame duck status, Whitley’s problem is that he doesn’t show up at the Capitol for weeks at a time. And when he does, he launches into a diatribe rather than engaging in a reasoned discussion.
Last year, he showed up and chastised Will Davis for a tax loophole bill and showed a list of all the taxes that businesses faced. This was occurring at the same time that he was advocating for a GAS TAX increase. I’d remind folks that he still wants a gas tax hike and said it’s ok because people wouldn’t notice.
- wordslinger - Wednesday, May 14, 14 @ 2:03 pm:
–Perhaps a company doesn’t want their financials known in general and there are a lot of good business reasons for this–
Who are you talking about? From what I can tell, the big Edge winners are large publicly traded corporations that are already required by federal law to publicly disclose quarterly and annual financial reports.
CAT, Deere, Sears Holding, Navistar, Motorola, Boeing, Reynolds Consumer, Wrigley, Chrysler, Continental Tire, Ford….
All publicly disclose financials. Again, I think they don’t want you to know how little they pay in corporate income tax.
Remember ADM?
- RonOglesby - Wednesday, May 14, 14 @ 2:07 pm:
more programs and “credits” aren’t what are needed. Simplicity in business licensing, simple fee/tax structure, and a fair environment where a competitor with “a hookup” in City or state government gets hooked up fast, while you sit and wait and beg, and go to meetings to get variances.
- Keyser Soze - Wednesday, May 14, 14 @ 3:01 pm:
This commenter has no desire to publicize his tax returns. Why should anyone else be so inclined?
- wordslinger - Wednesday, May 14, 14 @ 3:04 pm:
- The business must agree to disclose income tax information during the term of its EDGE agreement, including gross income, the amount of income allocated to Illinois, and net income before and after credits are applied. This information will be publicly available on DCEO’s website.–
That’s not a tax return. That’s information that would already be found in an annual report — except for the amount of Illinois income tax paid.
- VanillaMan - Wednesday, May 14, 14 @ 3:28 pm:
The taxes and regulations will increase in Illinois until prosperity returns!
The hole we are in, just isn’t deep enough because our current leadership can still see light over their heads.
- Precinct Captain - Wednesday, May 14, 14 @ 4:41 pm:
If you can only argue against this proposal by completely misrepresenting it and by not understanding that small businesses by almost any way you measure them, save for manufacturing, aren’t in the EDGE credits business, you probably shouldn’t be commenting on this.
- Doug Whitley - Thursday, May 15, 14 @ 3:08 pm:
Let me attempt to explain. The real intent of the bill is to shut the door on the “Special” Edge Credit which has only gone to 9 companies, but which was sought last fall by a half a dozen new ones. So, the GA is moving to make it complicated and so unattractive that few, if any companies, will seek it. Frankly, I am not a fan of the “Special EDGE”, but this bill is neither a good “fix” or a betterment of the Illinois Economic incentive/development program.
What is most troubling is that the GA continues to unnecessarily send out negative, anti-business signals and rhetoric that is picked up by tax professionals, business executive and investors. Such action is unnecessarily adding fuel to the anti-Illinois narrative. It is counter productive.
Specifically, the internet tax disclosure requirements stick out like waving a red flag. So why continue to do it?
If the members of the GA are no long comfortable with the “special EDGE” they should simply repeal the provisions instead of drawing further attention to the matter, as this amendment does.
The “special” EDGE only exists because the majority of EDGE elligible companies are unable to take advantage of the credit due to no income tax liability. As I testified, there are other ways to allow the companies access to the earned credit without allowing the claim to be applied against employee withholding. The GA could take a different and useful approach instead of what is being offered.
Removing the $1 m threshold in order to allow more small businesses to apply for EDGE is a good move, but keep in mind that 70,000 Illinois small business also report no income tax liability and thus will only be eligible to pursue the “special EDGE” labyrinth established by the DCEO & Speaker’s amendment. It is not the most helpful approach for small business.
I am perplexed and incensed because I continue to watch our political leaders make poor choices, that fail to fix tax administration or improve our economic competitiveness. For some reason they do not recognize there are economic consequences to political decisions. They seem to think no one is paying attention, but the opposite is true.
And, btw, I am in Springfield every week that the GA is in session, but am selective about testimony.