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* The tax cut package is just way outta hand…
Discussions of tax breaks began when CME Group, which owns the Chicago Mercantile Exchange, said the exchange might leave Illinois unless it gets relief from corporate income taxes. Sears Holding Corp. also wants concessions keep its operations in Hoffman Estates.
After that, tax breaks to benefit other companies were added to the mix, including extension of research and development credits, raising the exemption for estate taxes, and reinstating another business tax credit that had been eliminated when the state raised the income tax.
Gov. Pat Quinn insisted that individuals also share in the package, proposing an increase in the earned income tax credit for low-income wage earners.
Eliminating bonus depreciation would help pay for the package the first two years, but in the third year the cost is estimated at almost $800 million to $850 million. [Emphasis added.]
At the same time, the provisions would cost more and more. By 2014, the state would face $848 million in lost tax revenue, a number that would only grow.
But that’s assuming no significant jobs are added or businesses expanded, the opposite of the intent of the package, state Rep. Ed Sullivan, R-Mundelein, said at a joint Illinois Senate and House Revenue Committee hearing Wednesday.
“If we’re stagnant, and don’t succeed, then we’re looking at that. But we’re anticipating this creating an economic climate to spur growth,” Sullivan said.
* Meanwhile, CME Group’s competitors are now lobbying against its tax cut…
A trio of competitors to derivatives exchange CME Group Inc. (CME) joined forces Wednesday to persuade Illinois lawmakers to block proposed tax breaks intended to prevent CME from leaving Illinois.
Other exchanges would be hamstrung by the bill that would tax CME and options exchange CBOE Holdings Inc. (CBOE) for 27.54% of all electronic transactions, said David Kupiec, a lobbyist who testified before the Illinois House Revenue and Finance Committee.
Kupiec represented Atlanta-based IntercontinentalExchange Inc. (ICE) and New York-headquartered NYSE Euronext (NYX), and Nasdaq OMX Group Inc. (NDAQ).
Currently, the Chicago-based exchanges pay taxes on all electronic trades, which account for about 85% of all business at CME.
The legislature is “picking winners and losers” among competing businesses if the measure is adopted, said Kupiec.
Kupiec described the 27.54% tax apportionment as an arbitrary figure. State officials said the tax figure came from U.S. census data estimating how much of the exchanges’ electronic trades are based in Illinois. Exchanges should be given the chance to opt out of the new taxing method, Kupiec contended.
More testimony is expected Friday from CME’s competitors.
* Related…
* Deal near to keep Sears in Illinois: The three sides, in Springfield for a legislative hearing, met for two hours in the office of House Speaker Michael Madigan and unexpectedly came away with the framework for a deal that would extend a tax break for Sears but for a shorter time period. Sears would give up some tax relief, allowing cash-strapped Community Unit School District 300 to get about $34 million more over a decade… A key lawmaker on state tax policy said one of the biggest challenges to putting together a major tax package that would help Sears and CME Group is figuring out how to pay for it.
* Illinois tax plan upsets small businesses: In testimony at the Capitol Wednesday, several small business owners said the General Assembly’s consideration of a tax bailout plan for the CME Group Inc., which owns the venerable Chicago Mercantile Exchange, needs to be scrapped or at least delayed until next year.
* Sears tax deal before lawmakers again
* CME Knew of MF Global Fund Shortfall Before CFTC Regulators
posted by Rich Miller
Thursday, Nov 17, 11 @ 3:06 am
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When is the legislature going to offer enhanced tax cuts for saving for retirement or education?
Comment by Anon Thursday, Nov 17, 11 @ 6:50 am
How about we bail out Madigans, Montgomery Wards, International Harvester. We’ve done the ” Too Big to Fail” thing.
Comment by McGone Thursday, Nov 17, 11 @ 7:04 am
Anon, how about the state pay for it by taxing retirement income and raising tuition?
Comment by Michelle Flaherty Thursday, Nov 17, 11 @ 7:07 am
i wonder why CME’s competitors want the board to move out of illinois??? oh, wait, CME has a competitive advantage (bandwidth speed) that can’t be duplicated anywhere else.
it’s almost like i forgot…
Comment by bored now Thursday, Nov 17, 11 @ 7:11 am
Michelle - they’ll need to tax retirement income and raise tuition to fund the tax cuts for corporate special interests…
Comment by Anon Thursday, Nov 17, 11 @ 7:52 am
Another great quarter for Sears, not…
http://www.reuters.com/article/2011/11/17/us-sears-idUSTRE7AG0WR20111117
Larger than expected loss.
Comment by OneMan Thursday, Nov 17, 11 @ 7:56 am
If the OWS keeps up, maybe the NYSE will relocate, too.
Comment by Kasich Walker, Jr. Thursday, Nov 17, 11 @ 8:25 am
@bored now - thanks for reminding everyone that CME cant just pick and move to BFE because Chicago is one of only six major internet nodes in the country.
Infrastructue matters.
Comment by Yellow Dog Democrat Thursday, Nov 17, 11 @ 8:49 am
Sears needs its own bill. I sure do wish they were moving back to downtown Chicago though.
Comment by Yellow Dog Democrat Thursday, Nov 17, 11 @ 8:50 am
What are the other five nodes?
Comment by Happy Returns Thursday, Nov 17, 11 @ 8:51 am
Los Angeles, New York, Atlanta, Dallas, Chicago, and Washington, DC.
Comment by Kasich Walker, Jr. Thursday, Nov 17, 11 @ 8:57 am
Yeah let’s help these millionaires get richer. Then we can take away the teachers pension because we just don’t have the money for that. It is amazing that we will give a deal to these corporations while closing mental health facilities and destroying the middle class.
Comment by Fed up Thursday, Nov 17, 11 @ 9:05 am
YDD @ 8:49 am, I believe that’s the first time I have seen the BFE acronym used here. Thanks for a good laugh!
Is there a way to make this tax break bill contingent on having CME reimburse customers of MF Global for their losses, since CME knew MF Global was in trouble but did nothing about it? Failure to notify authorities about wrongdoing led to JoePa being shown the door, yet our lawmakers are talking about giving $ to an entity that also failed to notify.
Comment by cover Thursday, Nov 17, 11 @ 9:09 am
It is not fun watching Springfield get snookered by CME. It is almost painful to watch this happen in real time.
Illinois really needs to elect smarter reps.
Comment by Pete Thursday, Nov 17, 11 @ 9:09 am
Deals like this are made easey, when the speaker and senate president are both millionaires,,
Comment by Anonymous Thursday, Nov 17, 11 @ 9:10 am
Sears will be out of business soon.They are not investing in their stores and are choosing to let them decline. According to the Wall Street Journal, “Sears has notched 316 million in losses over the first half of this year and burned through nearly half the $1.2 Billion in cash it had a year ago.” Miguel Bustillo “Sales Fade at Sears, Which Has Long Skimped on Stores” Wall Street Journal [New York] 11/17/11, Marketplace: B1. 11/17/11
Comment by Lucky Thursday, Nov 17, 11 @ 9:13 am
@Pete 9:09am
There has to be a new appreciation throughout the state of couples who have wedding ceremonies but don’t legally marry in order to extend their receipt of state benefits like LINK; & section 8 landlords who rent to family members.
Comment by Kasich Walker, Jr. Thursday, Nov 17, 11 @ 9:16 am
It’s that time of the week again, where I ask:
What, exactly, would CME be moving?
They already said they’ll keep the trading floors here. Open outcry is 20% of their business (not chump change; who walks away from 20% of their business?). Much of their electronic trading is done in cubes right off the floor.
They’re marketing, as we speak a brand new co-location in Aurora, set to open in January. It’s state-of-the-art. They’re not walking away from that.
Mayor Emanuel, you’re a formerly highly compensated CME board member. They were your single biggest campaign contributor. You’ve said a CME tax break is one of your top priorities in Springfield. Maybe you can tell us:
What. Are. They. Moving?
Comment by wordslinger Thursday, Nov 17, 11 @ 9:36 am
Kasich - Is that what Illinois has turned into? A kleptocracy? Maybe that is too strong…how about an fleecocracy or exploitocracy…everyone exploiting everyone else for their own gain…including Springfield.
Maybe this is why Illinois ranks high on Site Selection’s rankings…
Comment by Pete Thursday, Nov 17, 11 @ 9:40 am
When wordslinger and I agree, then I REALLY know I’m on to something.
Let me add that I’m glad to see small business owners realize that big business is eating their lunch. They should be asking where the NFIB and their local chambers of commerce are on this giveaway.
I’ll be celebrating Small Business Saturday after Thanksgiving and hope I am joined by many, many here.
Comment by Yellow Dog Democrat Thursday, Nov 17, 11 @ 9:47 am
This seems to have started when we raised the corporate income tax, maybe it would be cheaper to just reduce it to what it was?
Comment by Ahoy Thursday, Nov 17, 11 @ 10:03 am
Pete,
Illinois has been a kletpocracy for a very, very long time.
Comment by Anonymous Thursday, Nov 17, 11 @ 10:11 am
@Ahoy -
This has nothing, NOTHING to do with the corporate income tax hike. Not directly anyway.
Duffy admitted he’s been lobbying for a massive tax break for two years, long before the corporate tax hike, and Sears is seeking to extend a tax break that pre-dates the corporate tax hike by a decade, I believe.
However, what the tax increase did do was set the stage for a strategic communications and lobbying plan for companies to reach their hands out for even more handouts.
Following the tax increase, there was a flurry of news stories pushed by business groups and Republicans at home and abroad. I invite everyone to flip back to the coverage here on Capitolfax, where Rich pointed out that most if not all of the mainstream media coverage was either blown way out of proportion, one-sided, or completely fabricated.
But, the easiest story to tell the public is a story they already know, so businesses here in Illinois who wanted to shakedown state government adopted the meme of Illinois’ anti-business tax code.
Nevermind the empirical evidence that shows that the #1 Factor driving business siting decisions is the quality of local education and job training programs…and Illinois’ tax hike was designed in part to prevent catastrophic cuts to those programs.
I’m not saying that CME may not have a legitimate point about tax code fairness, or creating economic growth in Illinois.
But you can’t have a discussion about tax code fairness without looking at the more than $1.4 billion in corporate tax breaks that Illinois already hands out, shifting the tax burden to families and small businesses.
Nor can you have a discussion about investing $100 million to grow jobs in Illinois outside of the Budgeting for Results process. We are creating a massive system to hold the smallest non-profits accountable for delivering measurable results for every single dollar of taxpayer money they get. But we’re going to give a $100 million blank check to one company…money that could be used to grow small businesses, or fund early childhood learning, or provide college financial aid? I don’t think that’s such a wise idea.
Comment by Yellow Dog Democrat Thursday, Nov 17, 11 @ 10:30 am
=== “we’re anticipating this creating an economic climate to spur growth,” Sullivan said.” ===
With all due respect to my friend Rep. Sullivan, how much economic growth, through what mechanism, how will it be measured, and what are the consequences if, say, CME just gives the $100 million to shareholders?
There is a reason that the Illinois General Assembly - led by Rep. Jack Franks - enacted the Corporate Accountability Act of 2003. Big corporations were getting handouts from state government in return for promises to create jobs, then taking the money and running.
That’s why state money now comes with strings attached — how many jobs? By when? What will they pay? — as well as clawback provisions that allow the state to take the money back if the corporation doesn’t fulfill its end of the bargain.
But Duffy says that CME won’t agree to any proposal that includes any of those provisions.
Under Duffy’s proposal, CME could use some of the money to give him a $10 Million pay raise and the state would be powerless.
Comment by Yellow Dog Democrat Thursday, Nov 17, 11 @ 10:38 am
–At the same time, the provisions would cost more and more. By 2014, the state would face $848 million in lost tax revenue, a number that would only grow.–
So while everyday W-2 schnooks and the small businesses that actually PAY corporate income taxes get whacked with a 66% increase, the Big Machers with the season tickets, and the funders, and the eager ears of your GA members, are looking to take nearly a billion dollars off the table.
If you can’t spot the chump the first time the deal goes round, you’re it.
Comment by wordslinger Thursday, Nov 17, 11 @ 10:46 am
Sears is hardly a company poised for growth; they’re the last place we should be giving a tax break too.
Tax breaks to corporations should be given sparingly and those breaks should be tied to keeping or growing jobs in Illinois. Otherwise it is just pure corporate welfare. Yes, they might move elsewhere. But giving individual companies tax breaks just ticks off other companies, who then get in line for their tax break.
Comment by Robert Thursday, Nov 17, 11 @ 11:00 am
I’m so sick of these people. Let them move. But they have to move–I mean, no setting up shop just over the border but living in Wilmette. Nope, you move whatever it is the CME is talking about moving, then the board members have to live in Indiana as well.
Comment by Cheryl44 Thursday, Nov 17, 11 @ 11:03 am
Word’s got it right. If you look closely, CME is not clearly threatening to move operations which provide the bulk of the economic benefit to Illinois. They are threatening to nominally move units which would be a political and PR embarassment to Illinois, and a PR coup for another state, for which they will pay.
Comment by walkinfool Thursday, Nov 17, 11 @ 11:18 am
===If you look closely, CME is not clearly threatening to move operations which provide the bulk of the economic benefit to Illinois.===
They are threatening to move the headquarters and the Aurora facility. That would kill off all but maybe 20 percent of their tax liability here.
Comment by Rich Miller Thursday, Nov 17, 11 @ 11:21 am
I’m tired of the idiotic state legislators and governors in their incessant race to the bottom. They play into the hands of the corporations who use threats to pack up and move to secure special deals in the tax code. After wringing a deal out of the state, they wait two or three years and then threaten to move again. At some point, the states need to realize that taxes pay for the infrastructure that is attractive to business and call their bluff. What we should be doing instead is developing excellent schools, parks, roads, etc, so when the CEOs come asking for a tax break, we can point to the benefits they would lose by moving.
Comment by Pot calling kettle Thursday, Nov 17, 11 @ 11:23 am
===and call their bluff.===
And then what happens if they’re not bluffing?
Comment by Rich Miller Thursday, Nov 17, 11 @ 11:24 am
Big corporations barely have to shake down taxpayers anymore. Headline-chasing politicians will just give your money away and claim they “created jobs.”
Kraft is going to get a taxpayer payday when it splits in two. They’re not threatening to move. They’re not threatening to lay off people. They just put their hands out and both the city and state appear to be eager to lay money on them so the governor and mayor can get a photo op about “creating jobs.”
It will be interesting to see how much taxpayer money Kraft gets. Kraft booked $4.1 billion in profits last year on $49.5 billion in revenues.
And they have their hand out. And they will get what they want.
http://www.chicagobusiness.com/article/20111111/NEWS02/111119968/all-carrot-no-stick-kraft-seeks-state-incentives-but-has-no-plans
Comment by wordslinger Thursday, Nov 17, 11 @ 11:25 am
===then the board members have to live in Indiana as well. ===
Yeah, that’ll be legal.
Comment by Rich Miller Thursday, Nov 17, 11 @ 11:38 am
Thanks Rich, for the clarification. I had missed the threat about the Aurora facility being clearly made.
Comment by walkinfool Thursday, Nov 17, 11 @ 11:50 am
–And then what happens if they’re not bluffing? –
Rich, it’s the worst, most breathtakingly stupid and insulting bluff of all time because there is no incentive for the other guy — the state — not to call it. In fact, the only reasonable course of action is to call it.
Consider:
CME is keeping its trading floors here, 20% of its business. CME only wants to pay taxes on the 20% of the business done on the trading floor, or it will “move.”
Think about that.
If the state caves to CME, its income tax take will be reduced to the 20% of the business done on the trading floor.
But if the state does nothing and CME “moves,” it will still collect income tax on the 20% of the business that’s done on the trading floor!
It’s a push, either way.
But if you call the bluff, you still have a chance at collecting tax on 100% of the business if they don’t “move,” plus you don’t have to pay for the Christmas tree of breaks its going to take pass a CME bill.
It makes no sense whatsoever not to call the bluff. Having said that, I have no doubt this poker game is fixed and it will eventually fly.
Comment by wordslinger Thursday, Nov 17, 11 @ 12:24 pm
So they’re going to abandon their brand spankin’ new Aurora facility? And how do they explain that write-off to their shareholders? Oh right, with a $100 million dividend. I know a lot of traders, many of them work there, none of them are moving…they’ll find other jobs first. And if that exchange goes away, others will come in. You watch - as YDD said, infrastructure matters.
But, I gotta disagree with YDD on Sears, they don’t need their own bill…and they shouldn’t get any bill. They may have 6,500 employees or whatever, but they certainly don’t have the capital for that kind of move, do they? I’d put the over/under at 5 years for them going out of business in any event…and I’d take the under. IF we’re going to give tax breaks to large corporations and put a further burden on small business, and I think that should be a really big if, it should only be for companies with demonstrable growth opportunities and guaranteed job growth. Sears doesn’t, and won’t, have that.
For my part, I say screw ‘em all and I don’t care if they leave. I’m not an occupier, tea partier or an ideologue. I’m a pragmatist. And the idea that after the legislature FINALLY had the guts to do something about the state’s fiscal situation, even if it didn’t totally solve it, only to give a bunch of it away to a relatively few number of companies, is simply appalling.
Comment by Thoughts... Thursday, Nov 17, 11 @ 12:26 pm
===It’s a push, either way.===
That’s totally ridiculous. CME rotates billions through local banks every day. High volume traders would relocate with the company to get a very miniscule, but all-important time advantage. The list goes on.
You are gambling with the entire Chicago-area’s economic future based on some sort of blind hate.
I despise that CME put us into this position, but Illinois has just about nothing to bargain with. And your constant claims that CME couldn’t go anywhere else are just flat-out wrong. They can most certainly go.
And spend some time with Duffy, as I have, and you’ll see that he wants to go.
Your arguments, word, are usually spot on here. This time, you’re arguing not from logic and facts but emotion, something you regularly chide others for doing.
Comment by Rich Miller Thursday, Nov 17, 11 @ 12:34 pm
===but they certainly don’t have the capital for that kind of move, do they? ===
Some of you folks just don’t understand the amount of money that other states are putting on the table here. You also don’t quite get the not so subtle partisan agenda of wrecking the president’s home state, which is driving some (not all, but some) of this poaching.
“Let ‘em go!” is a great slogan… for Detroit.
Comment by Rich Miller Thursday, Nov 17, 11 @ 12:34 pm
===So they’re going to abandon their brand spankin’ new Aurora facility? And how do they explain that write-off to their shareholders?===
As I told you last week, Duffy claims that he’s been offered as much as $600 million to move that Aurora facility, which he built at a cost of $250 million.
Comment by Rich Miller Thursday, Nov 17, 11 @ 12:35 pm
Rich, if you want to point out any flaw in my logic, please do so. I’ve got nothing personal here — certainly not hatred — it’s just business.
One last thing: If CME could move to a no income tax state and operate its business, why doesn’t it just do so? That would seem to be the most “fiduciary responsible” thing to do.
And the Aurora co-location wouldn’t move, it would have to be rebuilt. In another location, presumably, that would have the market to support it.
Comment by wordslinger Thursday, Nov 17, 11 @ 12:40 pm
===it should only be for companies with demonstrable growth opportunities and guaranteed job growth===
With that logic, GM would’ve gone outta business.
Comment by Rich Miller Thursday, Nov 17, 11 @ 12:41 pm
===And the Aurora co-location wouldn’t move, it would have to be rebuilt. ===
The building would have to be rebuilt, but the innards - you know, the important parts - can be moved. They’re not exactly attached to each other.
And as far as pointing out holes in your logic, I have, time and time again.
Comment by Rich Miller Thursday, Nov 17, 11 @ 12:44 pm
===If CME could move to a no income tax state and operate its business, why doesn’t it just do so? ===
Careful what you wish for.
Comment by Rich Miller Thursday, Nov 17, 11 @ 12:49 pm
I’m not wishing for anything. I’m just seeking knowledge.
Comment by wordslinger Thursday, Nov 17, 11 @ 12:56 pm
You would think that with all the brouhaha over the CME and Sears tax breaks, along with those previously issued, a serious discussion of the Illinois tax structure would take place. It’s a hard thing to get done, but an easy thing to start the discussion…
Comment by Cincinnatus Thursday, Nov 17, 11 @ 12:59 pm
Rich what does Quinn say when very other corporation wants the same deal. What about the middle class that Dems are supposed to fight for they still have to live with the tax increase quinn lied to us about. This is poor government. A small incentive to stay is one thing this new deal is a massive boondoggle the state can not afford. Sears will be in bankruptcy soon enough. If the CME really wants to go that’s fine no state can afford to not collect taxes from such an operation. New businesses will pop up. This tax deal is a massive give away the state cannot afford.
Comment by Fed up Thursday, Nov 17, 11 @ 1:06 pm
===no state can afford to not collect taxes from such an operation. ===
Um, some states have no income taxes at all.
===New businesses will pop up===
Yep, new businesses which pump billions a year into the local economy will magically spring up somehow. I’m sure. Spoken like a true Detroitian, circa 1975.
Comment by Rich Miller Thursday, Nov 17, 11 @ 1:12 pm
Rich-
This was your comment at the beginning of the post: “The tax cut package is just way outta hand…”
Yet, each comment you’ve made in the thread seems to support CME.
I’m curious, what’s the “out of hand” part? Giving tax breaks to anyone but CME and Sears? What’s the cutoff for getting a tax break in your mind - should it be revenue-based or employee-based, or should there be some other method of calculation?
I only ask because you seem to have some pretty strong views about giving them their tax breaks in your thread comments but in the post you say it’s out of hand. How about you reconcile that for us?
Comment by Thoughts... Thursday, Nov 17, 11 @ 1:21 pm
@rich - if you are referring to TARP, i believe GM borrowed the money and then paid it back, and there were quite a few strings attached.
I’m not sure who first said “it’s not clear where to draw the line, but it is clear we have to draw the line somewhere.”
Well, this looks like a pretty good place to draw the line to me and a whole bunch of other people.
Ironically, Duffy & Co. Have been hoisted by their own petard. After all, Big Business has been demanding greater accountability and proven Return on Investment for allocated state resources. Well, now Joe Citizen wants an accounting of how CME will spend its $100 M a year and how he will benefit.
Comment by Yellow Dog Democrat Thursday, Nov 17, 11 @ 1:21 pm
===i believe GM borrowed the money and then paid it back===
Not all of it.
Comment by Rich Miller Thursday, Nov 17, 11 @ 1:23 pm
–And spend some time with Duffy, as I have, and you’ll see that he wants to go. –
He told the House Committee he wanted to stay. He told you something different?
Comment by wordslinger Thursday, Nov 17, 11 @ 1:24 pm
===Well, now Joe Citizen wants an accounting of how CME will spend its $100 M a year and how he will benefit.===
First I’ve heard anybody say that.
Comment by Rich Miller Thursday, Nov 17, 11 @ 1:24 pm
My experience with data centers is they are designed to have as few people as possible working in them. Most maintenance is done remotely.
HQ can be a receptionist (I know, it will be more than that).
My point being how many actual jobs would be lost?
Since most trading is done electronically I have a hard time visualizing why traders or anyone of consequence would move. Isn’t that the crux of the issue here? Jobs and the lost income tax as well as the economic activity from them?
Perhaps I’m missing something.
Comment by MikeMacD Thursday, Nov 17, 11 @ 1:28 pm
===He told you something different? ===
Illinois is his home. But he obviously is angry at the way he believes bidniss is treated here, and with some validity. He’s also been amazed by the out of state offers, and I can’t blame him for that, either. Add his frustration with Illinois to the very tempting offers and yes he seems to me to be leaning against staying unless he gets what he wants.
It’s straight-up blackmail. I hate it. But we haven’t exactly shown ourselves to be a business haven here. We’re not as bad as most say, but we ain’t great. Other states are. Plain and simple.
Comment by Rich Miller Thursday, Nov 17, 11 @ 1:29 pm
===Isn’t that the crux of the issue here? ===
Yes and no.
There aren’t many jobs in Aurora. Maybe 1500 direct Loop jobs would disappear. But that’s only a tiny fraction of the impact.
Comment by Rich Miller Thursday, Nov 17, 11 @ 1:31 pm
-“Let ‘em go!” is a great slogan… for Detroit. -
Obviously not a mantra that works everywhere or in every situation. But personally, I have little faith Sears Holdings can rebound. They can and are trying to reinvent themselves as an internet hub (and showing modest growth in that area) but let’s face it, that means far fewer employees are necessary, especially if much of the brick and mortar goes away. I seriously doubt that five years from now, if it exists, Sears will look anything like it does now. What protects us if they go into bankruptcy, what protects us if they have to significantly reduce headcount to remain viable?
I totally get the partisan angle on trying to destroy the President’s home state. It’s shameful, but then governors poaching from other governors regardless of party or reason is shameful. We live in a global economy, not a local or regional one, and moving businesses from state to state simply rearranges the deck chairs with reduced revenue because of the breaks, all the while making certain individuals (governors) look good. It’s a death spiral for our economy.
The only way out of that cycle is to recognize the global nature of the economy and try to poach businesses from other areas of the world (including our friends) while encouraging growth at home, rather than just moving companies around. To stop the cycle, it will take some brave people, and probably a not insignificant amount of pain, but until states have that recognition, they’ll just be practicing their own state-form of nationalism, which to me doesn’t seem all that productive.
Comment by Thoughts... Thursday, Nov 17, 11 @ 1:33 pm
===I have little faith Sears Holdings can rebound.===
If they go out of business, then the state isn’t out the tax break. No payroll means no EDGE credits.
Comment by Rich Miller Thursday, Nov 17, 11 @ 1:35 pm
Rich, we’re going to disagree. CME has built an enormously successful business here, the largest exchange of its kind.
Duffy told the House they’ve averaged 19% annual growth for 30 years. That’s a pretty good business environment, if you ask me.
–It’s straight-up blackmail.–
Then count me out.
But you worry too much. They’re going to get what they want.
Comment by wordslinger Thursday, Nov 17, 11 @ 1:38 pm
===They’re going to get what they want. ===
I’m not so sure of that.
Comment by Rich Miller Thursday, Nov 17, 11 @ 1:41 pm
I have noticed that as we reduce taxes on large buisness and the wealthy the bonuses and raises to top executives are jumping at huge rates…but that money is just going to executive compensation not to increase jobs or business.
We need a fair tax system that does not give preferential treatment to the wealthy. lets require people to pay social security tax on all income, investment and bonus included ewith no cap… and lets set the investment tax rate the same as the middle class tax rate.
So far having investment income at a lower tax rate is not trickling donw to the masses.
The States as a whole are eliminating tax dollars so we can help less then 1% of the populaion grow their pay and protfolios. This is not helping anyone addnew jobs, its just putting money in a few peoples pockets.
We seem to be letting the wealthiest american manipulte the idea that the more money the make the better off all of us are…yet while we have executives getting 38% increases in a economic donwturn, their companies add no jobs.
http://online.wsj.com/article/SB10001424052748704393604575614852198144276.html
Comment by Ghost Thursday, Nov 17, 11 @ 1:56 pm
I’ve been following the Rich/Word thread all day with great interest. It’s economic terrorism. While the line should have been drawn miles back, it needs to be drawn here. There is simply no justification for giving $100 million (say that out loud, $100 million) to a very profitable company simply because they asked and threatened to take jobs away from Illinois citizens if we don’t. Our government doesn’t negotiate with any other terrorists, but apparently if they would just put on a suite and some expensive shoes, they can get whatever they want.
If any break passes, I intend to spend 2012 knocking on doors and making sure that every voter in my district knows how their elected officials voted on this bill and why it is such a clear example of whether those officials are fulfilling their responsibilities or just playing games in Springfield. They are elected to act in the best interest of not only the district but the state, and this deal is not in the best interests of the state. The economic disaster we are all living through originates in business and the individuals who run them losing sight of the long term view because the short term dollar signs blocked it out. This deal, and other handouts like it, are the government’s version of the same phenomenon. “In the best interest of the state” doesn’t mean right now, or just in an election (or non-election) year, but the long term best interest of the state. This deal is not in the long term best interest of the state, for the same reason that negotiating with terrorists who threaten violence isn’t.
I have some faith that hard decisions can be made – the revenue bill (“outrageous 66% tax hike” to those who are shortsighted) shows that some in Springfield do take the future of this state seriously. Unfortunately, I don’t share Rich’s pessimism that CME will get what they want. I only see this bill collapsing under it’s own weight to come back in January as a streamlined, CME (and possibly Sears) only bill that is pushed through as fast as possible, under the fig leaf of being “what’s best for the state.”
Comment by Colossus Thursday, Nov 17, 11 @ 2:10 pm
Meh, what’s a few typos here and there! The last sentence should read: “Unfortunately, I don’t agree with Rich that CME might not get what they want…”
An ounce of editing is worth a pound of Internet embarrassment.
Comment by Colossus Thursday, Nov 17, 11 @ 2:13 pm
YDD,
GM paid things back?
http://content.usatoday.com/communities/driveon/post/2011/11/auto-bailout-losses-expected-to-rise-by-9-billion/1
For those interested, here is a story about Detroit’s collapse:
http://www.freep.com/article/20111116/COL33/111160318/Stephen-Henderson-Detroit-s-clock-striking-midnight
Rich/Word,
Every point you both make only reinforces my post above. This mess will not be cleared up until serious tax structure reform takes place. (Spending also needs to be addressed, but that’s for a different post.)
I will make a contention here. Companies WILL pay a higher tax rate than an adjoining state to base themselves here in Illinois. Not a whole lot more, but more. Wordslinger always points out what a great place to live Illinois is, and to some degree, he is absolutely right. But there are limits.
A company will pay more in taxes (and payroll and benefits) to attract and retain its employees, and Illinois CAN provide a high quality of life for employees. What a business CANNOT tolerate is uncertainty, and these deals do nothing but reinforce their worries.
Companies also see a state financial system that is broken. Throw aside the rhetoric for a moment, the budget is a mess. Overburdening pension obligations (existent or not), wilde programs, inept leadership. That’s the perception, right or wrong.
Solutions: difficult, maybe impossible.
But there is nobody, Republican or Democrat (they control it all so they should assume primary roles here), who is attacking the structural issues of our tax code and our budget problems. I don’t always agree with Schnorf, but he is levelheaded in his approach. More of this is needed from people. Madigan and Quinn would be a good place to start.
Until then, read the tea leaves. CME will probably get its break. So will the next big company. And until they see a flatter, broader, and somewhat lower tax rate, smart CEOs will shop around. Let me hazard a WAG, CME would hold off on their “threats” if they saw movement on these issues. They don’t. Companies are not philanthropies. Companies are in the game for profits for their shareholders, and before the class warriors launch off, consider this: Pensions are among the largest beneficiary of corporate profits since they hold considerable assets.
Comment by Cincinnatus Thursday, Nov 17, 11 @ 2:29 pm
–It’s straight-up blackmail.–
I’d say extortion because of the coercion, but that’s really just semantics. Still, extortion/blackmail doesn’t stop until someone stands up to it. If the state capitulates, then that will embolden them (and other businesses) to continue the practice and go bigger the next time. And if no one stands up, where does it end?
At times like this, I’m reminded of some lines from Goodfellas…
Business bad? Eff you, pay me
Had a fire? Eff you, pay me
Place got hit by lightning? Eff you, pay me
We’re stuck with the partners we have, until we say no more.
Comment by Thoughts... Thursday, Nov 17, 11 @ 2:34 pm
===I’d say extortion because of the coercion===
I stand corrected.
Comment by Rich Miller Thursday, Nov 17, 11 @ 2:43 pm
===And until they see a flatter, broader, and somewhat lower tax rate, smart CEOs will shop around. ===
State income taxes are already flat. They’re much less broad because some corporate CEOs (Cat, ADM, etc.) demanded it. Make it less broad and those CEOs will again throw a fit, even if they are lowered. Right now, they’re paying nothing or next to nothing.
Comment by Rich Miller Thursday, Nov 17, 11 @ 2:46 pm
===But there is nobody, Republican or Democrat (they control it all so they should assume primary roles here), who is attacking the structural issues of our tax code and our budget problems===
The House Revenue Committee has been diligently working on this for months, and planned to come up with a set of proposals next spring. Unfortunately, events intervened.
Comment by Rich Miller Thursday, Nov 17, 11 @ 2:49 pm
Instead of flatter, I meant “exemption-free”
Comment by Cincinnatus Thursday, Nov 17, 11 @ 2:59 pm
Rich,
Do you know if the Revenue Committee is working closely with CME, CAT and their associations?
Comment by Cincinnatus Thursday, Nov 17, 11 @ 3:00 pm
Yellow Dog Democrat: since the day that i moved here, i’ve been trying to explain to people that from chicago south (about 100 miles or so) has the BIGGEST BANDWIDTH in the country running down the middle of the IC. at the very least, we should have server farms coming out of the wazoo. at the very least. there is absolutely no reason why you could have a silicon prairie here, IF we wanted…
Comment by bored now Thursday, Nov 17, 11 @ 3:07 pm
Bored now,
Isn’t that basically what the University of Illinois has tried to accomplish with their Research Park and everything they’ve built up around the National Center for Supercomputing Applications?
Pretty hard to compete in climate, scenery and cultural perception with northern Cali though, unfortunately.
Comment by hisgirlfriday Thursday, Nov 17, 11 @ 3:30 pm
20 years ago, i thought very highly of u of i’s program. but there’s very little demand for supercomputer stuff now; it’s a pretty elite field and not a lot of jobs there. i can’t really think of anything innovative that has come out of u of i recently…
Comment by bored now Thursday, Nov 17, 11 @ 4:51 pm
I have to say I am impressed by the quality of the discussion related to Rich’s post. I think if members of the General Assembly are reading this and look at the balance of this discussion they have to risk losing the CME by giving either no tax break at all or one far smaller than what they want.
I believe the bulk of the clearing firms will maintain major operations in Chicago even if the CME leaves, because they are gobal trading firms, not just CME firms. Keeping those firms depends on the quality of people they can hire, the electronic/communication infrastructure of Chicago, cost of living that translates into employee costs, and travel times to center city. If the City of Chicago wants to keep these firms it should spend more time on those issues and less time lobbying for a CME tax break.
Comment by Rod Thursday, Nov 17, 11 @ 5:43 pm
HGF — I happen to be in Palo Alto right now, and you’re right about the scenery and the climate. But I can’t imagine what it would be like to be a young person trying to find a nice place to live close to work. The housing costs are out of sight. I was talking to some Googlers today — well-educated, highly skilled folks — and they said that they and most of their peers have roommates because they can’t afford to pay for places on their own. And you wouldn’t believe the traffic we ran into at 4 o’clock in the afternoon. I think we could find lots of great talent who would be willing to trade scenery for a nice, affordable condo and enough money left at the end of the month to take a vacation someplace sunny.
Comment by soccermom Thursday, Nov 17, 11 @ 7:43 pm
The CME tax break seems fair if the buyer/seller in the transaction are located outside of Illinois.
But the heck with Sears. And certainly expanding the EIC isn’t going to sit very well with taxpayers who were hit with a 2% tax increase.
But on the other hand, an article in Reuters claims the CME tax break could cost Illinois jobs as electronic trading is given more emphasis. And, a WSJ article tells about how other exchanges don’t want this tax break for CME. The CBOT floor won’t be moving per the articles I’ve read and that is really the capstone of Chicago. So, while I think the CME tax break is fair, I can’t see how the legislature could swallow that bitter bill right now.
Comment by Jack Thursday, Nov 17, 11 @ 8:50 pm
I really hate this, and that is why I have not really commented about it beyond complaining how the State put itself into this position by ignoring the business climate here.
You know how long it has been since Illinois had to really hustle for business? So long that it doesn’t know how to. So long that the old men who did the deals keeping big business in the State are gone. So long the State fell asleep at the switch and stopped thinking about business.
It isn’t just about the taxes. It is about the attitude. There has not been the kind of gratitude shown Ilinois businesses by Ilinois government.
I see a loser attitude here.
We set ourselves up. We painted ourselves into a corner. We are out of fashion.
I hate watching a badly ran state government make deals we cannot afford for dying corporations. But that is all we have on our plates because few are flocking to Illinois to open their businesses. Chicago has for too long stopped building and nurturing businesses with the kind of daily support and business ties necessary. For too long in Chicago it has been all about BIG businesses and BIG names in the businesses. It has been too much about the status quo companies that are now facing extinction in the 21st Century.
CME is rolling us. And it is our fault.
Comment by VanillaMan Thursday, Nov 17, 11 @ 10:57 pm