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* You most certainly know about yesterday’s spectacular defeat of the tax cut bill in the House…
Illinois lawmakers went home Tuesday night after hitting an impasse over a $250 million package of tax relief designed to keep several high-profile companies from leaving the state.
The Legislature could convene again when negotiators come up with a new version of the package, but there was no hint of whether that would take days or weeks or even longer. Senate President John Cullerton, D-Chicago, suggested action could be delayed until spring without any problem.
Coming up with a more palatable plan could be difficult. While the Senate approved the tax package Tuesday, it failed in the House on a stunning 8-99 vote.
More…
In the Senate version, families would get about $110 million in tax relief.
The standard personal exemption on income taxes, now $2,000, would be bumped to $2,050 and then increase with the rate of inflation in future years. The state version of the earned-income tax credit for poor families would rise to 10 percent of the federal credit, up from 5 percent.
The House version, which never came to a vote, didn’t link the personal exemption to inflation and offered an EITC of just 7.5 percent.
More…
“At this point in time, we’ve reached a temporary impasse. It’s not going to happen tonight,” a subdued Rep. John Bradley (D-Marion), a lead negotiator in the tax-relief push, said before the House adjourned for the day.
* The spinning began in earnest shortly after the bill was killed by the House…
Senate GOP leader Christine Radogno, of Lemont, said a deal was not reached because of a “failure of leadership” on the part of Quinn.
“He was nowhere to be seen today,” she said.
Quinn brushed aside the criticism and said, “I think everybody should probably take a step back and understand that if you’re going to have any kind of tax relief package, it must have significant relief for working families raising kids and working hard. Unless that happens, there won’t be any tax relief.”
He also dismissed concerns that a failure to act would force the exchanges and Sears to leave the state, saying “there is ample time” to reach a deal.
* And so did the damage control…
Mr. Cullerton noted that the CME-CBOE-Sears breaks would not take effect until July 1, and suggested that gives lawmakers time to finish a deal.
Though the companies reportedly are being courted by other states dangling large incentive packages, “I would suggest to them they should not take a rash action,” Mr. Cullerton told reporters.
Mr. Cullerton noted the Senate version of the bill passed with 36 votes, and other sources suggested that further talks in coming days could yield a deal.
But the legislative stalemate tosses the ball squarely back to the companies — particularly CME chief Terrence Duffy, who had wanted a deal by now.
* CME Group had no comment, but Sears issued a terse statement…
We are disappointed that, today, the legislature was not able to reach agreement and pass a package that will help us remain an Illinois company. It is our hope that lawmakers will achieve a compromise very soon as our timeline for making a decision about our future by the end of the year has not changed. We sincerely appreciate the efforts of many members of the General Assembly over the last several months on our behalf.
To offset the corporate tax cuts, the Senate bill included more tax relief for lower income individuals.
“It’s important that we acknowledge the 99%,” said Sen. Kwame Raoul, (D) Chicago.
“These mammoth companies, they want $150 million as a gift from the state of Illinois, that’s taxpayer money,” said Rep. Monique Davis, (D) Chicago.
But the Illinois Policy Institute says the controversial tax credit would amount to only $7.50 a year to the average family.
“Meanwhile, remember they took $1,500 from the average family with that income tax increase earlier this year,” said Kristina Rasmussen, Illinois Policy Institute.
* Related…
* Video: John Bradley on CME impasse
* Video: Roger Eddy on CME, Dem Tax Hike
* Illinois House tests CME Group, Sears bluff
posted by Rich Miller
Wednesday, Nov 30, 11 @ 9:05 am
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There are roughly 950,000 families that get EITC in Illinois. The senate version would raise the EITC by $110 million.
Pretty sure that average is much larger than $7.50/family. It’s more like $115 per family.
With that said, IPI made it very clear in their testimony on monday that they didn’t want more relief for low-income families. They are perfectly okay with tens and hundreds of millions in corporate welfare, but somehow believe that EITC will encourage poor people to not work and stay poor. Because, you know, that extra $115 a year is well worth staying in lousy jobs.
Why do people give IPI any credibility?
Comment by dave Wednesday, Nov 30, 11 @ 9:12 am
By the way…that $115/family makes an interesting comparison to the $17,000 or so per CME shareholder that they would receive if this bill passes.
Comment by dave Wednesday, Nov 30, 11 @ 9:16 am
And how is IPI defining the “average” family? The working poor are those that benefit the most from the EITC. If they are skewing the “average” family income closer to the median income, then, yes they are probably getting a $7.50 number, but that is really misrepresenting the focus of the EITC. God forbid those with the lowest income get a larger benefit!
Comment by Montrose Wednesday, Nov 30, 11 @ 9:17 am
They’re not talking about EITC, they’re talking about indexing the personal exemption to inflation.
Comment by Rich Miller Wednesday, Nov 30, 11 @ 9:21 am
“They’re not talking about EITC, they’re talking about indexing the personal exemption to inflation.”
Are you sure about that? The article specifically refers to a tax credit, which is what the EITC is and the personal exemption is not. Maybe ABC got it wrong, but article gives every impression they are just talking about EITC.
Comment by Montrose Wednesday, Nov 30, 11 @ 9:24 am
How much more will the “working poor” and the businesses that remain be asked to pay when the companies currently shouldering much of the tax burden in this state have already left?
Comment by Flip Wednesday, Nov 30, 11 @ 9:25 am
Two questions come to my mind on the tax bill:
1 - For a bill that passed by a good margin in one chamber, why did it fail by such a large margin in the other chamber?
2 - Will Sears win or will District 300 win even after District 300 has upset more than a few people in the capital?
Comment by Left Out Wednesday, Nov 30, 11 @ 9:25 am
8-99? Wow.
Did Madigan get some bad shellfish at that Boehner dinner Duffy took him to? Surely the three-dimensional chess master knew what was going down when he called the bill.
What was the point of letting it go down that badly, that publicly?
I still believe CME and Sears will get most of what they want, eventually, but I wonder what the end game is here. Open up the checkbooks for primary funders and we’ll vote again in January?
Comment by wordslinger Wednesday, Nov 30, 11 @ 9:26 am
Rich- maybe, but that isn’t clear in the article. The article only references the “controversial” “tax relief for lower income individuals.”
The personal exemption is for all tax payers, not just low-income tax payers.
Comment by dave Wednesday, Nov 30, 11 @ 9:26 am
“But the Illinois Policy Institute says the controversial tax credit would amount to only $7.50 a year to the average family.”
Give me a break. The state EITC averaged about $112 per family in 2009, the last year for which comprehensive data are available. It doesn’t take a rocket scientist to calculate that increasing the size of the credit by 50 percent - as the House legislation proposed - spells an average of at least $56 of additional tax relief for families.
In other words, the IPI figure on the House bill is off by about 650 percent.
And remember that the Senate legislation would have gone further to double that existing, $112 average of relief per family.
Comment by EITC guy Wednesday, Nov 30, 11 @ 9:30 am
I now see Rich’s point that the IPI might’ve been attaching its $7.50/family figure to the exemption increase rather than EITC boost (regardless of how news media reported it).
Of course, the IPI’s report on the EITC still makes a bizarro-world argument against increasing the credit size. They say it’s bad because the amount of the EITC that’s owed a family tends to decrease as the family’s earnings increase - as if that’s a bad thing!
So instead of offering help to those who need it most - poor families that work for a living - we should eliminate that well-targeted assistance and share it with the wealthiest of households?
President Reagan - who called the EITC “the best anti-poverty, the best pro-family, the best job-creation measure to come out of Congress” - would NOT have approved.
Comment by EITC guy Wednesday, Nov 30, 11 @ 10:08 am
–How much more will the “working poor” and the businesses that remain be asked to pay when the companies currently shouldering much of the tax burden in this state have already left?–
What companies are those, Flip?
How much of the “tax burden” does Sears Holding carry right now? Less than me or you, if you care to google their last annual report.
CME pays taxes, no doubt, because they make a lot of money here in Illinois, and have for decades.
There was an ongoing discussion in the GA on reforming the state tax structure, but CME jumped the gun and made ultimatums rather than participate.
Now, they probably need to stew until they get their deal, or at least a face-saving gesture sometime next year. Or they can take that $600 million deal (why haven’t they already).
By the way, according to the Budget Book, here’s the expected breakdown in income taxes for FY 2012:
Individual: $14.95 billion
Corporate: $2.76 billion.
Who’s shouldering the burden, Flip?
Comment by wordslinger Wednesday, Nov 30, 11 @ 10:10 am
I love the commenters who want to paint the successful corporations as the bad guys because they use the tax code to avoid paying the corporate income tax.
They pay many other taxes. How much in income taxes, sales taxes and property taxes do the thousands of people employed by Sears in this state pay? A lot.
It’s dangerously narrow-minded to play down a corporation’s contributions to the state economy and the state treasury by simply looking at one factor. Those attitudes, like the one wordslinger displayed above, are part of the reason why leaders of business know Illinois is a lousy environment for employers - when compared to other states.
If we don’t have any successful corporations, then we don’t have any jobs, folks.
So they lawfully structure their finances so they don’t pay income taxes. Do you use your standard exemption when you file, or do you forego it? Get over it. They make more contributions to this state than any commenter on here.
Comment by Old Milwaukee Wednesday, Nov 30, 11 @ 10:23 am
Stuff like this is why Illinois has been ranked #2 of the “Worst Run” states in the country
http://xfinity.comcast.net/slideshow/finance-15worstrunstates/illinois/
Comment by Dan Shields, Springfield, IL Wednesday, Nov 30, 11 @ 10:24 am
I’m fascinated by this “worst run” ranking…by what standards and what factors were considered. When I taught Ethics in Government, I found a scholarly study that ranked Illinois as one of the top 3 most ethical states based upon the criteria used.
Comment by D.P. Gumby Wednesday, Nov 30, 11 @ 10:30 am
==They’re not talking about EITC, they’re talking about indexing the personal exemption to inflation.”
Are you sure about that? The article specifically refers to a tax credit, which is what the EITC is and the personal exemption is not. Maybe ABC got it wrong, but article gives every impression they are just talking about EITC. ==
At the hearing Tuesday, the $7.50 number came up as the value of the increased exemption to the average family, and referred to as enough for a sandwich and a drink. Whoever passed that on as a reference to the credit simply got it wrong.
Comment by anonymice Wednesday, Nov 30, 11 @ 10:34 am
Of course this plays into the national debate on governments, deficits and spending. As we all know, whether or not we agree with their positions, the national Republicans have stood firm against tax increases, and they want to balance budgets solely through cuts. The Grover Nordquist anti-tax-increase pledge comes to mind.
Imagine if the left took an anti-entitlement-cuts pledge and proposed only cutting the military and taxing the rich? The left would be excoriated; heck, Obama is already viciously attacked, even as he proposes massive cuts on the entitlements side.
Won’t the income tax increase sunset in 2014? Will the CME just say to heck with Illinois and its business environment and plan on moving, or will it hang around and try to get a better deal?
Sorry for the questions, but I can’t help wondering why the Republicans didn’t vote for the bill and reignite the tea party types in its stand against taxes and spending?
Comment by Grandson of Man Wednesday, Nov 30, 11 @ 10:34 am
–Those attitudes, like the one wordslinger displayed above, are part of the reason why leaders of business know Illinois is a lousy environment for employers - when compared to other states.–
Yet, for some unfathomable reasons, Illinois has a larger economy than all but four states. Because it’s so bad here, right?
Comment by wordslinger Wednesday, Nov 30, 11 @ 10:39 am
I love the commenters who want to paint the regular taxpayer as the bad guys because they don’t want corporations to use the tax code to avoid paying the corporate income tax.
They pay many other taxes. How much in income taxes, sales taxes and property taxes do the millions of people who are not employed by Sears or the suits at CBOT in this state pay? A lot.
It’s dangerously narrow-minded to hand out taxpayer cash to every empty suit who shows up at the Statehouse threatening to leave Illinois. Those attitudes, like the one old milwaukee displayed above, are part of the reason why 61% of Illinois businesses pay NO INCOME TAXES - as compared to other states.
If we don’t have any limit on what amount of taxpayer money the General Assembly will give away to profitable day traders and failing appliance outlets in response to said threats, then we don’t have any sense, folks.
So they lawfully structure their finances so they don’t pay income taxes. Do you (Joe Taxpayer) get to structure your finances to pay no taxes? Do you get to show up at the Statehouse and say “lower my taxes or I am moving my family to Alabama”?
Get over it. They make more profits than the taxpayers whose cash they want to threaten our “leaders” out of.
Comment by Lester Holt's Mustache Wednesday, Nov 30, 11 @ 10:54 am
Word,
We have the fifth most population and the fifth largest economy. That’s not a shock. Wherever the people are is where they spend their money.
What most of us see is that the trend is not good. It takes a long time to turn around a large ship, and the ship of Illinois is turning for the worse and has been for some time now. It doesn’t happen overnight. A crappy attitude toward employers is helping turn our ship of state, along with our crappy policies.
I don’t like running down my state, and clearly you don’t like it, either. But we can’t stick our head in the sand and pretend like everything is OK and all the critics are just naysayers.
Employers, also known as businesses or corporations are not the root of our problems, they are the solution.
Comment by Old Milwaukee Wednesday, Nov 30, 11 @ 10:55 am
~Yet, for some unfathomable reasons, Illinois has a larger economy than all but four states. Because it’s so bad here, right?
Well, Illinois is the 5th largest state by population…
Comment by William Wednesday, Nov 30, 11 @ 10:55 am
– If we don’t have any successful corporations, then we don’t have any jobs, folks –
That’s less and less true - you can have very successful corporations that create few jobs. Take a look at what Apple did with their data center in North Carolina. That only created 50 jobs, and many (if not all) of those jobs didn’t go to go to locals.
http://www.washingtonpost.com/business/economy/cloud-centers-bring-high-tech-flash-but-not-many-jobs-to-beaten-down-towns/2011/11/08/gIQAccTQtN_print.html
The argument that large corporations need the tax breaks to help create jobs just doesn’t pan out. I’m not saying that Apple, or CME, or Sears, shouldn’t try to get the best it can get, but it’s misleading to think that the money directly turns into jobs. You want to give tax breaks - fine. Give them to the small business man or the individual. Big corporations are making sufficient money.
Comment by Name Withheld Wednesday, Nov 30, 11 @ 11:06 am
–Well, Illinois is the 5th largest state by population…–
What’s your point? Would people be here if they couldn’t work?
As far as Old Mil and his concerns about “attitudes,” whatever that means.
Did anyone’s attitudes keep CME from posting a 29% increase in profits in the third quarter?
Were “crappy attitudes,” whatever those are, the reason behind CBOE posting a 69% increase in profits in the third quarter, it’s best quarter ever?
http://chicagoist.com/2011/11/04/cboe_cme_profits_rise_as_they_compl.php
I’m in business. I have no problem with anyone making money. I like making money. But I refuse to be a chump.
Comment by wordslinger Wednesday, Nov 30, 11 @ 11:08 am
==They make more contributions to this state than any commenter on here.==
But they also make massive profits, like the CME, and by all accounts, corporations like the CME are having a terrific economy while so many others are not.
Comment by Grandson of Man Wednesday, Nov 30, 11 @ 11:09 am
I miss ROD!!!!!!!!!!!!!!
Comment by PQ's Primary Opponent Wednesday, Nov 30, 11 @ 11:18 am
Also, Wisconsin lost something like 9,000 jobs in October 2011, the most by any state for that month, and this is under a Republican tea party government.
Wisconsin still has a higher personal income tax than Illinois. Will Wisconsin lower its income tax? And if not, why not?
Comment by Grandson of Man Wednesday, Nov 30, 11 @ 11:20 am
- D.P. Gumby - Wednesday, Nov 30, 11 @ 10:30 am:
I’m fascinated by this “worst run” ranking…by what standards and what factors were considered. When I taught Ethics in Government, I found a scholarly study that ranked Illinois as one of the top 3 most ethical states based upon the criteria used.
Here’s the stats:
2. Illinois
State debt per capita: $4,424 (13th highest)
Pct. without health insurance: 13.8 percent (23rd lowest)
Pct. below poverty line: 13.1 percent (25th lowest)
Unemployment: 10 percent (10th highest)
Comment by Dan Shields, Springfield, IL Wednesday, Nov 30, 11 @ 11:29 am
Interesting poll by Hartford Financial.
You know what really concerns business? Not taxes, not regulation, but lack of customers.
http://boss.blogs.nytimes.com/2011/11/21/small-businesses-over-taxed-and-over-regulated-a-survey-says-no/
Comment by wordslinger Wednesday, Nov 30, 11 @ 11:30 am
Since we’re throwing stats around, don’t forget that IL lead the nation in job loss during July (to paraphrase GoM: “the most by any state for that month and this is under a Democrat liberal government”).
IL then lead the nation in jobs added during Oct.
Let’s not take 1 month out of perspective on either front.
Comment by Shock & Awww(e) Wednesday, Nov 30, 11 @ 11:35 am
Maybe now the Legislature can go back to the table, rework the corporate tax system and eliminate the corporate welfare / tax breaks / special industry breaks / exemptions.
About the only exemption I would allow would be one for capitol investments in Illinois, pro-rated over the life of the investment (using Federal IRS depreciation rules?) and, maybe, one for actual job creation. I would want to see the job creation one have an agressive claw-back clause requiring the total value of the exemption plus interest to be repaid if the agreed to jobs target wasn’t met. I would also want a provision that made sure it was job creation, just not job switching from one employer to another (such as when a different security company takes over a contract and hires the previous contractor’s staff but claims it as “new” jobs and gets federal / state credits for it). I realize that will be tough to police; the State may actually have to hire some more people to enforce it.
As part of the package, establish a corporate tax rate that will bring in essentially the same or just a touch more revenue as today from the broader base, i.e., a level playing field for all businesses. That would pretty much eliminate most of the unfairness argument of CME; they would still pay a big chunk but they could no longer argue other businesses weren’t paying their share. Other businesses will howl because they will be losing their loopholes that let them avoid paying any corporate income taxes. But that is what tax fairness is about; taxing everyone the same instead of the government picking winners and losers.
After that bill is passed, then there should be a separate serious discussion about whether it should be the individual or business paying taxes to fund the State. There are valid arguments on both sides. The fundamental question is who gets the most value from the State’s educated workforce and infrastructure, individual taxpayers or businesses? Logically, whoever is getting the most value should be paying the most in taxes to support that environment.
Comment by Retired Non-Union Guy Wednesday, Nov 30, 11 @ 11:35 am
@Old Millwaukee -
I’m willing to give Sears the benefit of the doubt and concede your point that they deserve some credit for the individual taxes paid by their employees.
Let’s see: Sears employs 6000 people in Illinois. Out of 5.8 million. That’s .08% of the workforce. In order to extend the same tax cuts to every employer in Illinois on a per employee basis, the state would have to come up with $62 BILLION a year for the next five years.
Don’t get me wrong. I’m not necessarily against some sort of deal for Sears or CME, although I do think its worth looking at an alternative plan to bring Sears back to Chicago and i think tax breaks for either company ought to be held to the same Return on Investment standards that we’ve imposed on other budget line items.
Comment by Yellow Dog Democrat Wednesday, Nov 30, 11 @ 11:38 am
- Well, Illinois is the 5th largest state by population… -
Man, I’m sure glad all of those people just happened to show up here to give us the fifth largest population. Seriously folks, do you think that the Chicago metro area was some kind of accident?
Comment by Small Town Liberal Wednesday, Nov 30, 11 @ 11:42 am
IMHO no one wants to big picture the corporate tax collections. A few big fish and a lot of small (read less than 100M revenue regular C type corporations) are paying the lions share of the 2.7B collected. These are the patriotic try to play by the rules type of companies.
Most of the large and mid size C corps pay zero income tax.
Many profitable large companies are set up as LLC or partnerships and pay 1.5 percent state tax.
Many LLC and partnerships put a Florida address on the US Form 1065 and pay zilch. How many Illinois legal and consulting firms have out of state tax addresses and pay zero?
This set up is blatantly unfair to the few who pay the big $$$.
Blago saw this and tried to real force compliance through a Gross Reciepts Tax. He always was over optimistic(greedy/duh).
My solution is:
1) a GRT of .01 percent as part to the corporate tax returns to force compliance (no tax effect).
2) lower the corporate tax to 1-2%.
3) raise the replacement tax to 3-4% across the board … and collect the money.
4) Watch the big players that need big city central US location move into Illinois with the jobs. We have what they need but they do not trust us.
The tax system as it now set up penalizes BIG employers. The systems rewards slick income shifting type entities (no jobs).
We need jobs.
Comment by gg Wednesday, Nov 30, 11 @ 11:42 am
–But the Illinois Policy Institute says the controversial tax credit would amount to only $7.50 a year to the average family.
“Meanwhile, remember they took $1,500 from the average family with that income tax increase earlier this year,” said Kristina Rasmussen, Illinois Policy Institute.–
The Illinois Policy Institute is less than worthless as a source. It waterboards data to get the desired answers.
Comment by King Louis XVI Wednesday, Nov 30, 11 @ 11:46 am
Gumby @ 10:35 said ” … Illinois as one of the top 3 most ethical states …”
What decade was that?
I worked as an employee under 5 governors and as a contractor under 2. The only reasonably honest administration I worked under was Gov. Ogilvie. He brought in Civil Service protection for the employees and had the guts to push the income tax knowing it would most likely prevent his re-election. Every other administration I worked under was worse, ethically speaking …
Comment by Retired Non-Union Guy Wednesday, Nov 30, 11 @ 11:46 am
Billions in the hole and they are cutting taxes and never really cutting spending. Stimulating in the short term, but unsustainable in the long term. Oh, the same for the state.
Comment by wishbone Wednesday, Nov 30, 11 @ 11:58 am
~What’s your point? Would people be here if they couldn’t work?
10.1% of them seem to be. My point was that Illinois has an economy in line with the population. As does nearly every other state. Is the population of the state dependent on its economy? Yes. Is the gross economy of the state directly related to its population? Yes.
Comment by William Wednesday, Nov 30, 11 @ 12:03 pm
Another Illinois vote buying income redistribution scheme appears to be in the works. Give the big guys a tax breat and support it by handing out money to buy votes for re-election. WHo pays? Why the people in the middle once again. Brilliant!
Comment by Observer Wednesday, Nov 30, 11 @ 12:07 pm
How much will the tax payers save if Sears, CME, etc. bolt to new turf?
“………….acknowledge the 99%?” That’s what this discussion needs, more buzzwords. Puleeze.
Comment by Keyser Soze Wednesday, Nov 30, 11 @ 12:49 pm
RTNUG @11:46= Amen!!!
Comment by Irish Wednesday, Nov 30, 11 @ 1:02 pm
I guess I have to rather agree with, I believe, Rep Franks, who commented last night that basically Sears paid no tax last year, so are the citizens of the state supposed to pay Sears to stay here?
I tend to also agree with other who have commented that given their financial situation do they really have the money to move or is this just a holdup with a water pistol?
Comment by Irish Wednesday, Nov 30, 11 @ 1:05 pm
2011 was a tax-raising year b/c the October 2010 general election had just occurred, so it was the best moment to raise taxes.
2012, you see, is the year to LOWER taxes, so they are going to wait until next year so it is fresher in the minds of the public that they voted for tax relief.
It’s a page right out of Todd Stroger’s cook county sales tax increase book… raise it right after getting to office, the maximum amount of time to the next election, then grant “tax relief” the year of the election.
Right?
Comment by Peter Snarker Wednesday, Nov 30, 11 @ 1:18 pm
===How much in income taxes, sales taxes and property taxes do the thousands of people employed by Sears in this state pay? A lot.===
True. But it doesn’t logically follow that the state should just give out a tax break over a threat to leave. Make any incentives for corporations tied strictly to growing the number of full-time jobs in Illinois. That would incent growth companies to come to Illinois/stay in Illinois.
Comment by Robert Wednesday, Nov 30, 11 @ 1:25 pm
This might be a little off the topic but since we are discussing taxes…..
Sometimes I am amazed at the comments that come from our alledged leaders. In last nights session a resolution was introduced regarding the Occupy movement. Members rose to make comments pro and con which is to be expected and should happen. But some of the comments were unbelievable. Several GOP members made statements against the protestors because arrests were made. That got me thinking of one of the most famous protests in our country’s history. The dumping of the tea into Boston Harbor. It was destructive, The tea being dumped did not belong to the dumpers, so it was theft and damage to another’s property. The ships probably had locks on the holds so it was breaking and entering, burglary to be exact.
So the GOP takes what has come to be known as the name of this famous protest and applies it to it’s own movement. …
Then makes detrimental comments about the Occupy movement because arrests were made. ?????
Comment by Irish Wednesday, Nov 30, 11 @ 1:31 pm
Robert,
Again, I did not enter into this debate to argue for the tax break. I take exception to the commenters who trash Sears and any other business because they “don’t pay taxes”, when what they mean is they don’t pay the corporate income tax. Clearly, many taxes are paid as a result of what Sears does in Illinois.
That tired argument is a form of class warfare. They demonize the coroporation in an effort to make their point.
What I’m saying is that corporations are not villains, they are the necessary components by which our economy operates and, without them, we’re all screwed. So, at least give them the respect they deserve - if not the special deals.
Comment by Old Milwaukee Wednesday, Nov 30, 11 @ 1:36 pm
Old Milwaukee = Following your premise, a tax increase to keep state employees from being laid off would be justified because as one of the larger employeers in the state many taxes are paid because of those employees remaining employed. And as a bonus services are rendered to Illinois citizens.
Comment by Irish Wednesday, Nov 30, 11 @ 1:48 pm
Generally, I believe that corporations don’t pay taxes, people do. Those people may be customers, shareholders, vendors, employees, etc, but the corporation itself only takes in and hands out cash to others, with no net positive effect on the amount.
Comment by steve schnorf Wednesday, Nov 30, 11 @ 1:55 pm
Not even close, Irish. State employees do not have the same impact on the economy as private employees because state employees are funded with taxpayer funds.
When a private company hires a $50,000 per year person, that person will pay over $2,000 in state income taxes for a net positive impact of $2,000 to state government.
When the state hires a $50,000 employee, that employee will pay over $2,000 in income taxes, but state taxes are paying her full salary, so the net fiscal impact on the state is negative $48,000.
Your extrapolation of my premise is way off.
Comment by Old Milwaukee Wednesday, Nov 30, 11 @ 2:00 pm
“Not even close, Irish. State employees do not have the same impact on the economy as private employees because state employees are funded with taxpayer funds.”
And private employees are funded by the same people, just they are buying things from a private company instead of buying services from the government with taxes.
And either employee - public or private - spends money. They buy food, clothes, cars. They pay rent and mortgages. They pay fees and local and county sales tax and on and on. That spending, regardless of whose hands it comes from, support the Illinois economy.
So, if you want jobs, you want jobs. Drawing a bright line between public and private doesn’t really help us reach that goal.
Comment by Montrose Wednesday, Nov 30, 11 @ 2:17 pm
Unless she is the snowplow driver that is responsible for the road going to the Sears facility and if she isn’t there then none of your corporate employees get to work. Then her worth is considerably higher.
I guess the point I am trying to make is that we seem to go out of our way to save a couple of thousand jobs in the private sector, yet when a couple thousand state jobs are threatened in the public sector we seem unwilling to do the same. Yet we demand the same levels of service from those state agencies.
And if state employees have such a negative impact on the economy, why is it that communities strive so hard to get large state institutions built in their communities?
Comment by Irish Wednesday, Nov 30, 11 @ 2:27 pm
–so the net fiscal impact on the state is negative $48,000.–
The fiscal impact may be negative but sales taxes, property taxes, various license fees and other required state and local expenditures also come out of that $50,000.
Comment by Anonymous Wednesday, Nov 30, 11 @ 2:27 pm
==When the state hires a $50,000 employee, that employee will pay over $2,000 in income taxes, but state taxes are paying her full salary, so the net fiscal impact on the state is negative $48,000.==
Public employees add value in other ways, such as providing people with basic needs that would probably not be done consistently in the private sector. We hear about charities and how we should stop subsidizing government and instead give to charities because of freedom from oppressive big government, but will charities deliver the benefits as consistently as the government?
Comment by Grandson of Man Wednesday, Nov 30, 11 @ 2:33 pm
Oh, good grief, Grandson. You better believe that most charities do deliver the services they provide far more efficiently than most state government agencies. And you know what? Their employees tend not to enjoy the inflated, life-long pensions that many public employees receive. Irish: That’s a cost of funding a public employee that you conveniently have neglected to mention.
Comment by Flip Wednesday, Nov 30, 11 @ 2:42 pm
I don’t want to see thousands of jobs leave Illinois as much as I don’t want to see extremely profitable corporations get tax breaks that are not commensurate with their earnings.
Is there a middle ground, here?
Comment by Grandson of Man Wednesday, Nov 30, 11 @ 2:43 pm
**When the state hires a $50,000 employee, that employee will pay over $2,000 in income taxes, but state taxes are paying her full salary, so the net fiscal impact on the state is negative $48,000.**
Sigh…
Comment by dave Wednesday, Nov 30, 11 @ 2:45 pm
Flip, so if government help went away, charities would deliver food and health benefits at the same level of consistency as Medicaid, Medicare, SNAP and Social Security, etc., with the same guarantees? Is there any example that backs this up at the level that government provides these services, and I ask with all due respect, because I haven’t seen it (sorry to digress)?
Comment by Grandson of Man Wednesday, Nov 30, 11 @ 2:47 pm
**Their employees tend not to enjoy the inflated, life-long pensions that many public employees receive. **
I believe that the average pension of an IL state worker is less than $40,000 a year. And they don’t get social security.
If that is inflated, I’m not quite sure what to tell you.
Comment by dave Wednesday, Nov 30, 11 @ 2:47 pm
Please send all of your money to the government so they can hire more employees and our economy can flourish. This will make dave, grandson and Irish happy. (snark)
Comment by Old Milwaukee Wednesday, Nov 30, 11 @ 2:51 pm
Old Mil, is that what those guys said? I don’t think so. That strawman is as weak and dull as the beer that bears your name.
Comment by wordslinger Wednesday, Nov 30, 11 @ 2:54 pm
Dave: Nearly all Social Security recipients receive far less than $40,000 per year, which is still a full year’s salary for many people. Why should public employees receive that kind of payout per year (with many public employees receiving far more than $40,000 per year) for life from the public trough, especially when their eligibility vests extraordinarily early in their gov. career and they are able to retire earlier than non-government employees?
Comment by Flip Wednesday, Nov 30, 11 @ 2:56 pm
Grandson: Whoever said that all government services should go away? However, why can’t some of those services be supplied through different channels? I’m speaking as a former eight-year federal employee.
Comment by Flip Wednesday, Nov 30, 11 @ 3:01 pm
==Please send all of your money to the government so they can hire more employees and our economy can flourish. This will make dave, grandson and Irish happy. (snark)==
I think this is oversimplified and starts to drift into sloganeering. I definitely don’t want to see massive job losses in Illinois, and in my limited (but hopefully growing) understanding of politics, I would not have been upset if CME and Sears got their breaks. Some others here, though, made important points, such as should every business now go to the legislature to get a tax break at the threat of leaving?
And beside this, the Republicans carry the failure of the bill’s passage as much as Democrats. Couldn’t Republicans just have voted for the bill, and if it was defeated, use the defeat for political gain?
Comment by Grandson of Man Wednesday, Nov 30, 11 @ 3:03 pm
Of course the great thing about having charities do state work rather than state employees is that we don’t have to pay them, and by them I mean the charities. Look, they do the work and we don’t pay them the money we owe them. Rather than a negative, I think this is perhaps the business model of the future. And here everyone thinks IL is so anti-business. We’re cutting edge baby.
Comment by Michelle Flaherty Wednesday, Nov 30, 11 @ 3:03 pm
Flip - so your argument is that because there are people that get paid poorly, and because social security pays less than $40,000 a year, therefore state employees don’t deserve a small pension. Got it.
And no, $40,000 a year is not a lot of money.
Comment by dave Wednesday, Nov 30, 11 @ 3:04 pm
When you take a shot at me, that’s fine. When you take a shot at my beer, that’s over the line.
Old Milwaukee, tastes as great as its name.
Comment by Old Milwaukee Wednesday, Nov 30, 11 @ 3:04 pm
==Old Milwaukee, tastes as great as its name.==
My friend strongly recommends Leinenkugel Original, which is not easy to find in Chicagoland.
Comment by Grandson of Man Wednesday, Nov 30, 11 @ 3:35 pm
Flip / Grandson,
First, let’s start by defining some terms properly.
The government has charity programs such as Medicaid, LINK, WIC, SNAP, etc. What distinguishes these programs is the people who receive the benefits *do not* directly pay to participate in then. These programs are given by government as charity … they are *not* an entitlement that they directly pay for.
Then there are true entitlement programs which include Unemployment, Social Security, Medicare, Work Comp and even government pensions. The direct recipient of the program (and/or their employer) actually pay directly into the program. You pay SS tax when you work; you pay unemployment tax when you work; when you retire you pay a monthly fee for Medicare. When you meet the criteria of the program, then you receive the benefit you paid for. We can have a whole discussion about whether or not the person (or corporation on his behalf) is fully funding the program or whether part of the program is social engineering, but the *fact* is that the recipient of the program *is* paying for the program. Because they are paying for the program, they are *entitled* to receive the program they paid for.
Although the end goals of the programs are similar, one category is bought and paid for and other is pure charity (i.e., welfare in all it’s forms) on the behalf of society. If you don’t distinguish between the (charity) welfare programs and the (paid for) entitlement programs, you are mixing apples and oranges.
Charity programs could, in theory, be replaced by private charities. As a practical matter, it probably isn’t going to happen because the current programs have created a welfare class that expects a certain level; they feel they are “entitled” to it just because they exist as opposed to having to work and pay for it. But they aren’t entitled by right of investment on their part; it is a gift (charity) from those of us who work.
As far as government pensions go, I can only speak knowledgeably about SERS (the actual State employees pension system). It basically follows IRS rules that any company would have to follow. To simplify things, I’m going to describe the typical Tier 1 (old SERS) rules. Your pension benefits vest at 8 years. To collect you have to be either 65 years old and have worked a minimum of 8 years for the State or meet the “Rule of 85″ which is age + service = 85. The benefit actually received is based on a simple formula: 0.0167 * years served * average final salary. Let’s take a 60 year old with 8 years …he can’t retire under the rules. A 65 year old with 8 years who earned $40,000 the last 3 years would receive 0.0167 * 8 * 40,000 = $5,334 a year pension. Another example, a long term state employee at age 55 with 35 years earning $50,000 (average wage in Illinois); they meet the rule of 85 and would receive $29,225 a year pension. Neither of those cases are exactly generous in terms of the pension received. The cases you read about in the paper are a few politically connected highly paid level management people, mostly in the TRS and SURS systems; they are not the typical state employee or teacher.
Finally, the new Tier 2 pension system is less generous than what I just described. There is a big question in many people’s mind about whether Tier 2 based systems in the future will even be ruled valid by the IRS for exemption from Social Security participation. To be exempt from SS, the pensions system must provide equal or better “protection” and some analysts say the new system may fail that test for the TRS and SURS pensions. Pensions that won’t qualify as being as good as Social Security … don’t sound like that’s very generous.
Comment by Retired Non-Union Guy Wednesday, Nov 30, 11 @ 4:03 pm
Dave: You’ve got it. You and I are apparently now on the same page. Public employees should not be entitled to receive generous lifetime pensions merely because they work 9 months out of the year in a state job or because they only put in a few days in that job to begin with. Don’t like the annual base salary and annual benefits while you’re in that job? Then find something else and don’t expect the rest of us to subsidize your lifestyles from cradle to grave.
Comment by Flip Wednesday, Nov 30, 11 @ 4:18 pm
Flip,
As bad as State delivery of services often is, having contractors do the job is often worse, both from a cost and service perspective.
Without getting specific, I’ve worked both sides of the fence and saw a lot of stuff. It wasn’t always better to contract things out.
Comment by Retired Non-Union Guy Wednesday, Nov 30, 11 @ 4:26 pm
Huh? What state employees work only 9 months?
Comment by dave Wednesday, Nov 30, 11 @ 4:32 pm
Dave,
I assume Flip is referring to teachers … a lot of whom are not technically State employees (they actually work for the school districts) but the, because of the method of funding, the State is responsible for their pensions (TRS).
Comment by Retired Non-Union Guy Wednesday, Nov 30, 11 @ 4:35 pm
B/c so many people go into elementary and teaching generally for the fat-cat “lifestyle” that Flip is sick of supporting.
I am going to be on the lookout for my kid’s kindergarten teacher and evidence of her high-falutin’ lifestyle, it makes me sick to see how good she has it.
A real member of the jet-set when she isnt teaching my child how to tie his shoes and wiping his nose.
Comment by Peter Snarker Wednesday, Nov 30, 11 @ 4:46 pm
Steve,
I agree that ultimately it is people who pay the taxes. The question is which people and how much. Do we tax every person equally or do we partially tax corporation owners indirectly by taxing the corporation? Should it be an income tax or a sales (consumption/use) tax or some other form?
I would argue there should be some level of corporate tax because the corporation owners receive a benefit from State infrastructure and some of those owners may not reside in the State of Illinois, so the only way to tax them is by taxing the corporation. Yes, if it can, the corporation will just raise their prices to cover the cost of the tax. But, again, unless the customers only reside in Illinois, the impact to Illinois taxpayers will be less than a direct tax on each Illinois worker. I suspect it would take some pretty sophisticated financial analysis to figure out which approach is really better.
Comment by Retired Non-Union Guy Wednesday, Nov 30, 11 @ 5:15 pm
Snarker: Sounds like you need to give your kids’ a better holiday gift or a shinier apple because, sooner or later (i.e. when the TRS dries up completely or when his/her skills are rendered obsolete by better educators in charter or private school alternatives), she/he is going to have to deal with the same economic winds that those in the private sector need to adapt to. Until then, I think that living with a slightly lower annual pension, which she/he will collect until death, is fairly reasonable.
Comment by Flip Wednesday, Nov 30, 11 @ 6:28 pm
That should read “your kids’ teacher”
Comment by Flip Wednesday, Nov 30, 11 @ 6:29 pm
Not sure why my post in response to Old Milwaukee’s post at 10:23 got deleted earlier so I guess I’ll try to get my point across now in a less feisty fashion…
Somewhere along the way people have lost sight of what corporations are and why they exist, as if there were no business enterprises and no jobs before corporations existed. That’s not true. Corporations are nothing more than legal entities created of the state (either chartered by state legislatures historically, or created as a result of someone filing paperwork and paying fees with the secretary of state now) that exist to help some person more efficiently manage capital and labor to maximize profits while minimizing tax and legal liability.
No one starts a corporation to make jobs. They start a corporation to make bigger profits. PEOPLE CREATE JOBS.
It is unfortunate how pervasive the attitude has become that acts as if corporations = job creators when that’s simply not the case.
It also doesn’t take into account the huge expenses that corporations impose on everyone else, especially if they are not paying their fair share of taxes and are getting outsized benefits compared to unincorporated mom and pop businesses in terms of getting the best educated workers from our taxpayer-funded schools, doing more business across a wider area so using taxpayer-funded highways more, using up more public safety resources to adequately police and protect their properties while adding huge burdens on the taxpayer in terms of their impact on the state’s courts and regulatory systems (banking, environment, workplace safety, etc…).
We need an Illinois tax code that asks both Peter and Paul to pay for X rather than imposes taxes on Peter pay for tax breaks for Paul so he won’t leave the state.
Comment by hisgirlfriday Wednesday, Nov 30, 11 @ 6:31 pm
Friday: Have you ever actually worked for one of those big, bad corporations you evidently disdain? The Minnesota-based corporation that I work for just recently added 300 employees. That corporation supplies more vendors/suppliers than I can keep track of, who in turn hire employees to support their clients. Those companies in turn hire others. Are you telling me that, in actuality, I (rather than the corporation that I work for) created all of those jobs?! Well, thank you for all of that credit!
Comment by Flip Wednesday, Nov 30, 11 @ 6:37 pm
==The government has charity programs such as Medicaid, LINK, WIC, SNAP, etc. What distinguishes these programs is the people who receive the benefits *do not* directly pay to participate in then. These programs are given by government as charity … they are *not* an entitlement that they directly pay for.==
People who work and get Medicaid and SNAP do help pay for the benefits. We as consumers like products to be as inexpensive as possible. Employers keep their costs down by not paying for employee healthcare, which translates into lower prices for us and profitability for them. So these valuable employees should not be helped with healthcare? In fact, I know someone now who might need major surgery on Medicaid, and this person’s spouse works and pays income taxes.
So we want it both ways? We want people to work as cheaply as possible for us yet we don’t want to help them out?
Comment by Grandson of Man Wednesday, Nov 30, 11 @ 7:02 pm
Flip,
Yes, I have worked for corporations. Both small ones and big ones and for-profit ones and non-profit ones. Corporations that were well run and ones that were not so well run. I’ve also worked for mom and pop enterprises and cooperatives and been an independent contractor as well. Even done work for political campaigns and the government too. Now that my work history is out of the way…
It is misconstruing my viewpoint to act as if I am saying corporations are bad. That is not what I am saying. I’m simply pointing out that corporations are not good or bad. They are amoral. They are just instruments for savvy people to use in managing their financial affairs, either on a really small-scale level like with an S-corp or coming together with a bunch of people as shareholders in a large public corporation, and everything in between.
Jobs get created when there is a profit to be made from creating those jobs. The corporation in your example didn’t add employees out of the goodness of its heart but in responding to an external demand for those jobs being created. The corporation’s human shareholders and customers demanded the creation of those jobs to get something in return (a profit in the case of the shareholders and a good or service in the case of the customers).
Tax cut strategies like the special deal proposed for CME and Sears may create better profit margins for favored companies but are not likely to create more jobs for the taxpayers of Illinois.
Comment by hisgirlfriday Wednesday, Nov 30, 11 @ 7:24 pm
I just feel that Terry Duffy really blew it on this. His testimony should have been jobs, jobs, jobs. instead all he talked about was his “fiduciary duty” to CME shareholders. Terry-that may work for Wall Street but it aint gonna work with most legislators!
And Duffy was the one, supposedly, who would have gone into politics if he hadn’t gone into finance? At least I heard that on a radio interview some time ago I think.
Comment by I have issues Wednesday, Nov 30, 11 @ 7:37 pm
=== Charity programs could, in theory, be replaced by private charities. As a practical matter, it probably isn’t going to happen because the current programs have created a welfare class that expects a certain level ===
Um, as a practical matter its not going to happen because ALL charitable giving in 2010 for the entire country — individual, corporate, and foundations — was only $290 billion.
Charitable giving would have to more than double in order to replace the services of government.
I say “More than double” because the IL Dept of Revenue and IRS are extremely efficient fundraisers compared to most non-profits, which have overhead costs of anywhere from 15% to 50%.
Oh yeah, just some other problems worth pointing out:
1) Charitable giving fell by 13% in 2008-09 due to the recession, just when programs were needed the most;
2) Only 9% of that $290 Billion went to human services organizations;
3) 1 in 3 households basically make no charitable contributions at all.
So, if you can figure out a way to more than double charitable giving AND convince everyone to direct their new dollars to human services, I’d love to hear it.
When your done with that, you can introduce your amendment to the Preamble of the Illinois Constitution:
We, the People of the State of Illinois - grateful to Almighty God for the civil, political and religious liberty which He has permitted us to enjoy and seeking His blessing upon our endeavors - in order to provide for the health, safety and welfare of the people; maintain a representative and orderly government; eliminate poverty and inequality; assure legal, social and economic justice; provide opportunity for the fullest development of the individual; insure domestic tranquility; provide for the common defense; and secure the blessings of freedom and liberty to ourselves and our posterity - do ordain and establish this Constitution for the State of Illinois.
While I recognize that previous courts have ruled that the Preamble is not binding, I think we can also agree that they ought to be more than words on a page.
The functions of state government are not “charity” in the modern sense, they are the obligations of living in a free society, or as our Constitution’s Bill of Rights states:
SECTION 23. FUNDAMENTAL PRINCIPLES
A frequent recurrence to the fundamental principles of civil government is necessary to preserve the blessings of liberty. These blessings cannot endure unless the people recognize their corresponding individual obligations and responsibilities.
Comment by Yellow Dog Democrat Wednesday, Nov 30, 11 @ 8:11 pm
Poor Flip. Just another victim of those fat cat teachers, janitors, cops, firefighters, prison guards, etc. living the high life on his dime.
Comment by Anonymous Thursday, Dec 1, 11 @ 7:48 am
–I just feel that Terry Duffy really blew it on this. His testimony should have been jobs, jobs, jobs. instead all he talked about was his “fiduciary duty” to CME shareholders. –
That’s very true. The PR on this has been breathtakingly bad.
You can make a reasonable argument that CME pays too much in tax, given the breaks that other corporations get on sales made outside the state.
You could have made that argument five years ago, ten years, twenty years ago. Why they waited until now, I have no clue. With the pull they have, it would have been an easy sell in flush times.
But, in the midst of The Great Recession, for incredibly profitable financiers to stick a gun to the heads of economically battered and anxious taxpayers — worried about their jobs, mortgages underwater and who just got whacked with a tax increase — invites nothing but incredulous scorn.
The funny thing is, these guys pay a lot of money for PR, to build their brand as a good corporate citizen.
That’s gone, and they’ll never get it back, no matter what happens now.
Comment by Anonymous Thursday, Dec 1, 11 @ 7:58 am
Anon 7:58 was me.
To add, why didn’t they jump in on the discussion on reforming the tax code? They could have been a player. They might have had to wait a year to get some relief, but you know what, they’re not going to the food pantry anytime soon. They are incredibly profitable.
Instead, they just delivered an ultimatum, a shakedown, what some have called blackmail.
For crying out loud, they didn’t even show up in Springfield this week. If that $100 million is so important, don’t you at least make an appearance for the vote? Maybe they’re more worried about the $550 million and counting they’ve had to put up for MF Global.
You have to draw a line somewhere, at some time, in some manner, and CME made it easy for me. You stick a gun to my head, you better pull the trigger.
Comment by wordslinger Thursday, Dec 1, 11 @ 8:09 am