Capitol Fax.com - Your Illinois News Radar

It’s not always horrible here

Posted in:

Illinois

Since Illinois increased its corporate income tax by 46 percent from 4.8 percent to 7 percent this past year, several unexpected and expected changes occurred.

The number of limited liability companies, or LLCs, and corporations registered with the state actually increased, from 71,449 in fiscal 2010 to 73,130 in fiscal 2011, according to the Illinois Secretary of State.

The number of non-farming jobs increased by 1 percent, from 5.6 million in 2010 to 5.7 million in 2011, according to the Illinois Department of Employment Security.

The unemployment rate has risen a full point in the past year, from 9 to 10 percent, while the US rate dropped from 9.1 percent to 8.7 percent. Partly, that’s because as more jobs are being created, more people are actively looking for jobs. 30,000 new jobs were created in Illinois in October alone, the largest number in the nation.

* But, of course, not everybody is happy…

Todd Maisch, vice president of government relations for the Illinois Chamber of Commerce, the state’s largest business association, said the income tax increases have crippled economic recovery.

“To be honest, if you are really in a hard-hit industry, you’re probably operating at a loss and so you haven’t felt the impact,” Maisch said. “Probably the ones that were hit the hardest were those that were starting to come out of the recession and starting to turn a profit.”

* Then again, slashing the state’s budget in order to immediately repeal the income tax hike would surely result in job cuts…

Rolling back the income tax increases could have a ripple effect.

Illinois House and Senate Republicans say the rollback would foster job creation by creating a more competitive business climate.

But a premature rollback could result in teachers, firefighters and police officers statewide being fired, said Kelly Kraft, Gov. Pat Quinn’s budget spokeswoman.

The tax increases, set to expire by the end of 2014, are estimated to bring in about $7 billion to the state’s coffers.

* Look, it’s more than obvious that Illinois has to do far more to help businesses create jobs here. The Illinois Policy Institute’s latest statewide poll shows that 71 percent of Illinoisans say the state’s business climate makes it more likely for businesses to leave Illinois.

But we aren’t the unmitigated disaster that so many people want to claim we are. I’m not arguing that we should ignore bad economic news. Far from it. I’m just saying we ought to have fair media coverage of both the good and the bad. It’s really easy to tee off on this state. Yet, a lot of us wouldn’t want to live and work anywhere else. Yeah, I’ve had daydreams about moving to South Beach or Hawaii or even the Riviera. That ain’t gonna happen. My home, my family, my business, and most importantly my heart are all right here. It’s where I’ve chosen to make my stand in life. Those of us who’ve made that choice have an obligation to help make our state better. Criticism is an absolutely necessary aspect of that process and blind cheerleading isn’t helpful at all. But too often all we see is the easy bash. It’s like we’re addicted to being known as the worst. We perversely revel in it. We use it to whack the other side and further divide ourselves.

Enough, already.

* And speaking of the income tax hike and the budget, yesterday’s press conference with Republican legislative leaders and the Illinois Policy Institute contained much talk about how the budget could be balanced without the tax hike by reforming pensions and Medicaid. But Leader Cross’ pension reform legislation actually requires an increase in pension contributions of a billion dollars next fiscal year. Cross said later that he could change the bill to lower the pension contribution, but that hasn’t yet been done.

* Related…

* On anniversary of Illinois income tax hike, Republicans slam Democrats

* State GOP leaders push income tax repeal

* GOP’s Radogno, Cross call for repeal of Illinois’ income tax hike

* State GOP Leaders Push Income Tax Repeal

* Republicans Slam Democrats On Anniversary Of Income Tax Hike

* Illinois Republicans say pension reform is top prioirty in 2012

* Push for pension changes grows, but players are far from agreement

* Legislators named to pension reform group

* Aon to move corporate headquarters to London: The company said Chicago will remain its headquarters for the Americas and the move won’t result in job loss in Chicago or the United States. The company employs 61,000 people globally and expects to create 1,000 new jobs this year.

* La Salle Co. board approves zoning for sand mine near Starved Rock: The Illinois Department of Natural Resources owns and manages Starved Rock State Park and also administers the mining permit process – the next hurdle for Mississippi Sand.

* Park City mayor: Casino sitdown ‘cleared the air’

* Lt. gov. to job seekers: Check state website

posted by Rich Miller
Friday, Jan 13, 12 @ 9:43 am

Comments

I wonder if there’s any chamber of commerce in any state that says to the legislature when discussing business taxes, “Everything’s great. Everyone wants to come to this state, and new businesses are just sprouting up everywhere.”

Comment by the Other Anonymous Friday, Jan 13, 12 @ 9:54 am
Opps…Billboards Blows It - Again
“But Leader Cross’ pension reform legislation actually requires an increase in pension contributions of a billion dollars next fiscal year.”
When we first saw the picture of yesterday’s stunt we thought Billboards was announcing he had been named manager of the Dollar General in Yorkville, but then we saw Tillman there picking his nose so we knew it was another IPI fundraiser.
DID Tillman know Billboards needs another billion?
Maybe they will want a do over on the stunt

Comment by CircularFiringSquad Friday, Jan 13, 12 @ 10:02 am
Most job creators don’t really care about the income tax rates. That’s only one cost of doing business. Finding good talent and good customers and a good life are more important. Taxes are just the easiest thing to complain about.

There is reason why the North Side is basically like a mini-Midwest — Chicago is sucking in the talent from our entire region because this is the best place to live.

Paying 5% or 3% doesn’t really affect that. If all our costs of living are cheaper because we’re buying things in bulk through the government (like transportation and schools and health insurance), then who cares whether we pay more in taxes? It’s about the total standard of living, not just the tax rates.

Rich, you’re right again. People should quit taking perverse pleasure in spinning us in a negative light. People like optimism.

Comment by Dan Johnson Friday, Jan 13, 12 @ 10:14 am
People form LLCs to avoid corporate taxes. The profits flow to the partners’ individual returns which has a lower state rate.

Comment by Edison Parker Friday, Jan 13, 12 @ 10:14 am
Everybody here probably knows that the official unemployment rate is not a clear reflection of the actual rate. The rate is made artificially low by the numbers of people who have just given up.

But as Rich notes, the rate also can be inflated by what I like to call “the Bob factor” — as in, someone who had given up the jobs earch months ago hears that a friend has found a job and says to himself, “Gee, if Bob can get a job, I can get a job.”

So it’s not always bad news when the rate ticks up a bit after a steady fall. Obviously, a falling rate is best, but we need to realize that it’s only one imperfect measure of what’s happening in the job market.

Comment by soccermom Friday, Jan 13, 12 @ 10:15 am
I don’t doubt that a majority believe the state has a lousy business climate given the relentless barrage of gloom-and-doom for partisan purposes.

But I don’t buy the line that state fiscal or regulatory policies are the be-all, end-all to business.

Should the state right it’s budget? Yes. Are there regulations that could be changed? Sure, but point them out.

As I recall, the state economy was humming along quite nicely until the housing bubble burst, regardless of pension funding and workmen’s comp rules.

The housing bubble was the biggie that crashed 401Ks, put houses underwater, ground consumer spending to a halt and threw people out of work.

State policy had nothing to do with it. State policy also doesn’t control the fed, or the don’t-want-to-lend banks, or the price of labor in China, Mexico and India, or the price of oil.

State policy is a factor, but very small.

Besides, if it was such a lousy business climate here, why is Illinois the fifth largest state economy and Chicago the fourth largest metro economy in the world?

You can’t say larger population. Opportunity is what drew the people here.

Why does Indiana — which shares Illinois geographical advantages — have an economy less than half our size? Why didn’t business choose to build there?

Comment by wordslinger Friday, Jan 13, 12 @ 10:23 am
The willingness to lower the pension payment under SB 512 is a pretty significant concession on Cross’ part. It’s borderline major retreat, depending on how much he wants to lower it. Every Civic Committee talking point about SB 512 revolves around tackling the unfunded liability in the early years. This potential concession/retreat on Cross’ part underscores the difficulty in finding a “once and for all” type solution to the pension problem. If you’re unwilling or unable to pay more up front to stop the unfunded liabilities from growing, tinkering with benefits won’t do the trick in the short term.

And BTW, I think Quinn made a tactical mistake with his “fixing pensions once and for all” statement to the media in reference to his working group. Kinda makes you wonder how much he really knows about this issue.

Comment by The Elderly Man You Used to Love Friday, Jan 13, 12 @ 10:25 am
The story about Aon moving its HQ from Chicago to London gained my attention today. In addition to this website I also read the London press. On a regular basis the English press has stories about corporations moving, wanting to move, saying that they are thinking of moving, etc. out of London. The main reason for the move/possible move - taxes. Where else in the world have I heard about this same problem?

Comment by Left Out Friday, Jan 13, 12 @ 10:27 am
Every negative statement by every business lobbyist should be viewed through this lens:

“The day Todd Maisch says state government is doing a great job, Todd Maisch is out of a job.”

After all, if Illinois lawmakers were doing a good job, what would the Chamber of Commerce need Todd for?

Secondly, most businesses engage in short-term thinking that maximizes immediate profits at the expense of long-term, sustainable growth. The exact kind of thinking that got Illinois in to the state its in.

To paraphrase business guru Jim Collins: “Government should not be run like a business because most businesses are poorly run.”

Finally, “household budgets” and “company budgets” are useless, even counter-productive metaphors for state-budgeting.

Most households budget month-to-month, companies budget year-to-year, but state government has to look a generation or more down the road.

We don’t spend money on early childhood education because it provides an immediate “return on investment.” Those returns aren’t realized for a generation or more.

And some government programs, like preventing elder abuse, are undoubtedly money losers. Are we supposed to stop protecting the elderly and the disabled just because there is no profit in it?

Finally, let’s all remember that Pat Quinn, Mike Madigan, and Illinois state government did not create the global financial collapse and recession of 2008. The Chamber of Commerce and its members were responsible for that.

Yet now its Pat Quinn and Mike Madigan’s job to get us out of the ditch, and we’re suppose to follow the advice of the drunks who drove the car there in the first place?

Wrong, on so many levels.

Comment by Yellow Dog Democrat Friday, Jan 13, 12 @ 10:30 am
The GOP/IPI press event, using food for suffering families as the key prop, made as much sense to me as Romney expressing his experience fearing being fired. It just doesn’t jive with their perceived strengths, and made the event appear even more of a political stunt.

They would have been better off just talking through or showing the many ways companies could invest, and families could have used some extra cash.

Todd Maisch is an honest advocate, and it’s just like him to start by pointing out that the corporate tax increase didn’t directly impact every company. It adds to the Chamber’s case when they don’t grossly overstate the problem, (unlike IPI).

Comment by mark walker Friday, Jan 13, 12 @ 10:30 am
And, as someone who has spent a great deal of time on the Bureau of Labor Statistics, a little reminder of Illinois’ economic reality:

The Midwest in general, and Illinois in particular, are always the last to feel the affects of a recession and always the last to feel the affects of economic recovery.

We lag far behind California and New York, which drive the economies on the coast.

And while some states do whether recessions better than the nation overall, we are not fortunate enough like Texas or Alaska to be sitting on goo-gobs of oil and federal oil subsidies.

Take away those federal subsidies for oil, and we’d all be driving electric cars made in Bloomington.

Comment by Yellow Dog Democrat Friday, Jan 13, 12 @ 10:39 am
LLC’s do not pay Corporate Income Tax.

The manufactures (not LLC’s) are getting stuck with the tax increase. That is why the manufactures are leaving.

Comment by gg Friday, Jan 13, 12 @ 10:41 am
YDD: Thank you. Thank you. Thank you.

I find this dovetails nicely with your comment involving the Preamble from the other day, which I copied and pasted to a few friends.

What else is left to say?

Comment by Colossus Friday, Jan 13, 12 @ 10:42 am
===That is why the manufactures are leaving. ===

Please.

The vast majority of manufacturers are leaving Illinois for the very same reasons they’ve left other states: China, India and Mexico.

Comment by Rich Miller Friday, Jan 13, 12 @ 10:45 am
As has been shown here many times, plenty of manufacturers have figured out how to pay little or no state sales or income tax at all.

Comment by wordslinger Friday, Jan 13, 12 @ 11:03 am
I am uncertain how rolling back the income tax hike will result in firing firefighters and police officers. Maybe state police or state employees, but the primary employers being municipalities are not seeing a dime from the income hike, so where is the clear link between the two? Or is just too easy to play the public safety card.

Comment by Hey Now Friday, Jan 13, 12 @ 11:08 am
–Maybe state police or state employees, but the primary employers being municipalities are not seeing a dime from the income hike, so where is the clear link between the two?–

Municipalities receive a share of the income tax, and it’s been on the chopping block for a while in some circles. Reduce revenues by $700 million, and you can bet it will be again.

Comment by wordslinger Friday, Jan 13, 12 @ 11:16 am
**Or is just too easy to play the public safety card. **

Actually, it appears that it is too easy to play the ignorant card. Local governments absolutely have received money from the income tax increase.

Comment by dave Friday, Jan 13, 12 @ 12:12 pm
“Rich, you’re right again. People should quit taking perverse pleasure in spinning us in a negative light. People like optimism. ”

Optimism is expensive. Everyone was optimistic in the go-go boom years of the mid 1990s - early 2000. Optimism a-plenty back then.

But that was because money was being borrowed by the truckload. Now the butcher bill comes due.

Everyone wants to party, no one wants to pay the bill.

Comment by Jonsey Friday, Jan 13, 12 @ 12:30 pm
I too would like to finish my days in Illinois. One thing that has kept me here is the indefatigable spirit of many folks I’ve had the pleasure to encounter. Maybe it’s the winter here. In my mind, the turn around in Illinois is not about government employee pensions, salaries, corruption and taxes, although they certainly play a part. Its when the citizenry become sufficiently enraged to demand an end to the weekly killing of children in Chicago and demand an end to the deplorable conditions in too many of our public schools. I suspect the resolution, or at least the full time commitment of our citizenry, of these issues will show the rest of the nation that we have a soul and the rest of our problems will begin to solve themselves.

Comment by Cook County Commoner Friday, Jan 13, 12 @ 1:18 pm
YDD - Spot on

Comment by Irish Friday, Jan 13, 12 @ 1:37 pm
To add to Rich’s point, manufacturing jobs peaked in Illinois at 924,000 in 1990.

By the time the Edgar-Ryan era was over, Illinois had lost nearly 200,000 manufacturing jobs.

Since then, we’ve lost about 150,000 manufacturing jobs.

Here comes the really funny part:

If you look at the data, almost all of the job losses came during the national recession of 2000 and the recession of ‘08…180K jobs in the former and 110K jobs in the latter.

In Fact, Illinois has ADDED 20,000 manufacturing jobs since January, 2010. And manufacturing jobs have INCREASED during the tax hike.

I call “Pants on Fire.”

Comment by Yellow Dog Democrat Friday, Jan 13, 12 @ 1:40 pm
Illinois has a lot of positives going for it. If we could remove the negatives make it easier to do business Illinois and remove any perception that Illinois is not a business friendly state. Firms are not going to stay in or locate into a state they think is unfriendly to business and likely to become more unfriendly over time.

We also need to be realistic with things like manufacturing, no matter what manufacturing jobs are never going to return to employment numbers anything like they had in the past. It just not going to happen and even if competition from countries like China, India or Mexico was removed. As long as productivity in manufacturing is growing faster than demand, which it is, those jobs will continue to decline. Even after adjusting for inflation the value of manufactured goods turned on in the US is far higher now than it was when the most manufacturing jobs.

Comment by RMWStanford Friday, Jan 13, 12 @ 1:46 pm
I’m so tired of hearing Rich and all your dem buddies saying things like “yes we suck, but it’s not as bad as some say it is”. You should set the bar a little higher!

Comment by bnew Friday, Jan 13, 12 @ 1:48 pm
That’s not to say the state can’t and shouldn’t do more.

The best advice comes from other successful governors and the corporate VPs who actually make the recommendations on where to invest.

The easiest advice for Quinn is to adopt a “customer service” approach at DCEO. Build personal relationships with employers, help them solve problems, and be a resource.

The second, bigger issue is to invest in the actual things businesses in general need to succeed: skilled labor force, reliable infrastructures for energy, communications, transportation…and build the kind of quality-of-life communities that a CEO or VP actually wants to live in.

Contrary to popular opinion, business professionals dont like to send their kids to underfunded public schools, they don’t hate the theatre or museums, and they aren’t big fans of smog, dirty water, or paving over parks.

Comment by Yellow Dog Democrat Friday, Jan 13, 12 @ 1:52 pm
–I’m so tired of hearing Rich and all your dem buddies saying things like “yes we suck, but it’s not as bad as some say it is”. You should set the bar a little higher!–

Another victim heard from.

Comment by wordslinger Friday, Jan 13, 12 @ 1:59 pm
===You should set the bar a little higher! ===

Yes, you’re absolutely right. I should’ve deleted your inane comment. I apologize.

How’s that?

Comment by Rich Miller Friday, Jan 13, 12 @ 2:03 pm
@bnew - Illinois leads the Midwest in job creation. How exactly does that “suck”?

And just for kicks, I looked at the national manufacturing employment numbers.

The graph is identical.

The country added 315,000 manufacturing jobs since 2010.

About 1 in 15 new manufacturing jobs was in Illinois.

Comment by Yellow Dog Democrat Friday, Jan 13, 12 @ 2:06 pm
Don’t you find it interesting that as the jobs number rises, the employment number drops? This isn’t because the labor force is growing as people see recovery.

It’s because those jobs being created are largely part-time jobs going to people who already have one (or more) jobs.

It’s all there in the BLS data. If it were a matter of more people looking, labor force numbers would be rising rapidly. The number of employed Illinoisans has been a near non-stop decline since a year ago.

Comment by Lizard People Friday, Jan 13, 12 @ 2:17 pm
YDD - yes. When I used to look at the numbers, the lag was about 12 months going in and 18 months coming out … but that was back when IL had a bigger industrial /manufacturing base. Haven’t looked recently; has the shift to services changed the lag much?

Comment by Retired Non-Union Guy Friday, Jan 13, 12 @ 2:26 pm
I’d rather have greater value creation than greater employment creation.

Comment by Consumer Friday, Jan 13, 12 @ 2:45 pm
The unpopularity of the income tax hike suggests it won’t be made permanent. Consequently, state government is going to have to figure out how to balance the budget and make pension payments with $7 billion less in revenue by 2015.

Comment by reformer Friday, Jan 13, 12 @ 2:51 pm
Rich- Maybe things look fine to you because, as you said recently, you don’t see why funding 90% of pensions versus some lower number is important. That’s equivalent to seeing no difference between walking out on 10% of the tab for a lunch you just consumed versus some larger number, with our kids being stiffed for the difference. And it’s ironic that you should mention LLCs. Illinois charges $500 just to file to start a company, 2-4X higher than other states. Conspicuously wacking new company formation is just the kind of economic policy that has made so many Illinoisans so livid.

Comment by MarkGlennon Saturday, Jan 14, 12 @ 11:02 am
===Rich- Maybe things look fine to you because===

Are you illiterate?

Comment by Rich Miller Saturday, Jan 14, 12 @ 12:55 pm