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* Some eye-opening statistics from state Sen. Toi Hutchinson…
Hutchinson, who chairs the Senate Revenue Committee, addressed the question about fairness in taxation and the state’s ongoing tax breaks to keep major companies in the state.
“Statewide, 60 percent of corporations don’t pay any [state income] taxes,” she said.
“Only some 300 paid more than $1,000.Our corporation tax base is very narrow. If a corporation comes to Springfield and yells loud enough” the state will give a tax break.
Discuss.
*** UPDATE *** As pointed out by a commenter, Sen. Hutchinson appears to be incorrect. For tax year 2006, 380 corporations paid more than a million in income taxes and overall paid 73 percent of all income taxes. 67 percent paid no income taxes, however, so that’s essentially correct.
posted by Rich Miller
Tuesday, Nov 1, 11 @ 10:05 am
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Previous Post: Quinn goes completely over the top
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Thank you Senator Hutchinson for inserting an actual fact into this discussion.
Comment by soccermom Tuesday, Nov 1, 11 @ 10:07 am
Flatten the tax. Broaden the base. Eliminate subsidies. Eliminate breaks. Eliminate deductions.
Comment by Cincinnatus Tuesday, Nov 1, 11 @ 10:07 am
Did somebody say GRT?
Comment by Ok Tuesday, Nov 1, 11 @ 10:08 am
Toi provides the inconvenient truth. All the GOP squawking to the contrary, our corporate income tax is hardly a disincentive for 60% of businesses.
Comment by reformer Tuesday, Nov 1, 11 @ 10:09 am
I believe this is incorrect.
http://www.revenue.state.il.us/publications/AnnualReport/Annual-Report-2008-2009.pdf
On page 14, there is the breakdown of how many corporations pay taxes in a certain bracket. The amounts are in the thousands, so there are 367 that pay income taxes that are more than 1,000,000. This is the latest info I know of. (Tax year 2007)
Comment by anon Tuesday, Nov 1, 11 @ 10:14 am
==Flatten the tax. Broaden the base. Eliminate subsidies. Eliminate breaks. Eliminate deductions.==
A nice sound bite and stale talking point. Are you suggesting that the GA ignore the CME’s request for tax relief? Isn’t the income tax already flat?
Comment by The Doc Tuesday, Nov 1, 11 @ 10:17 am
Don’t forget the thousands of small businesses that are not registered as C-corporations, but rather S-corporations, which pass their revenues (and the associated tax liability) through to their shareholders, who then pay taxes at the individual rate. Those people aren’t getting any help either.
Comment by so... Tuesday, Nov 1, 11 @ 10:19 am
CME press release today via Crains:
The company said third-quarter net income rose 29 percent to $316.1 million, or $4.74 a share, from $244.3 million, or $3.66 a share, a year earlier. Analysts on average had expected $4.69 a share, according to Thomson Reuters I/B/E/S.
Expenses rose 4 percent to $302 million.
An average of 14.7 million contracts changed hands daily in the quarter, up 27 percent from a year earlier, the exchange said. Revenue rose to a quarterly record of $874 million.
I don’t know how this tax break will work out but I wish I had bought some CME shares last winter.
Comment by Bill Tuesday, Nov 1, 11 @ 10:27 am
so…..
You are absolutely correct. Does this include both S-Corp and LLC entities. If so, then the point is moot. There are a tremendous number of small community banks that switched to an S-Corp status years ago. They don’t pay any taxes, but the owners sure do.
Comment by Downstate Tuesday, Nov 1, 11 @ 10:28 am
anon I think you are correct, It looks like she misread the numbers…
http://tax.illinois.gov/ReveNews/DirectorsPresentation-7-19-11.pdf
110,000 Corporate filers (excludes s-corps and partnerships), only 876 C-Corps took state tax credits (0.7%) totaling 176 million.
450,000 Corps, S-Corps and Partnerships in Illinois file taxes for a total revenue of 2 Billion (same document I referenced).
That works out to an average of 4,444.44 per filer in state revenue. So either the 300 are paying a ton over 1K, or anon is right, she is misreading the documents.
Comment by OneMan Tuesday, Nov 1, 11 @ 10:31 am
–67 percent paid no income taxes, however, so that’s essentially correct.–
In all seriousness, why isn’t this part of a DCEO marketing campaign to attract new business to the state?
It might be very effective, if some of the big brains in the GOP would stop screaming that the state income tax is ruinous for business. Not when 2/3 of businesses pay no income tax at all.
Comment by wordslinger Tuesday, Nov 1, 11 @ 10:32 am
Also the document anon references only has hard revenue number from 2006, 2007 is an estimate.
Comment by OneMan Tuesday, Nov 1, 11 @ 10:34 am
Dear Terrence Duffy,
How was Florida last week? Things were rather damp in Springfield — at least, when it came to your hoped-for tax break.
A little advice: in politics, perception and timing are powerful forces. I’m pretty sure you must have known that your quarterly earnings were coming out Oct. 31, and that they’d show a 29% increase in profits from the previous year.
See here’s the problem. You made more money AFTER the tax increase than you did before. A lot more money. Nothing wrong with that, per se, it’s just that, you’re asking for a tax break when every chump who files a W-2 won’t get one.
So instead of working on your short game in Florida, you probably should have been in Springfield twisting arms to get a deal before your sweet quartlery report came out.
Oh, who am I kidding? CME will get whatever they want without lifting a finger.
Comment by wordslinger Tuesday, Nov 1, 11 @ 10:40 am
Messing with statistics is always fun. I bet a large percentage of those businesses who appear not to pay any income taxes simply pay at the individual rate.
If there is a profit, there is a tax of one kind or another to pay.
Comment by Plutocrat03 Tuesday, Nov 1, 11 @ 10:41 am
Wordslinger,
Our new state motto?
“Illinois. Scofflaws Welcome.”
Comment by Cincinnatus Tuesday, Nov 1, 11 @ 10:41 am
–”Illinois. Scofflaws Welcome.”–
Who’s a scofflaw? I certainly didn’t say that.
Comment by wordslinger Tuesday, Nov 1, 11 @ 10:45 am
Is it okay that today I love Wordslinger AND Cincinnatus?
Comment by soccermom Tuesday, Nov 1, 11 @ 10:45 am
Unless and until there is a GRT type tax in Illinois, we will always have these debates and the gaming of the tax system. If 67% of C-Corps are not paying any tax, it is a travesty.
Comment by Fair Share Tuesday, Nov 1, 11 @ 10:48 am
Yes, a number of the corporations that do not pay a corporate tax are small businesses where the CEO is the owner of the business. He’ll pay any corporate profits to himself as salary or bonus and pay the individual rate. But this just shows how unimportant the corporate tax rate can be for small businesses. Yes, walmart pays the corporate rate but they aren’t going to pack up shop and close all walmarts in the state.
Comment by anon Tuesday, Nov 1, 11 @ 10:49 am
As noted above many,probably most,are professional corps. all profits are distributed as income. lawyers docs architects etc.
Comment by professional Tuesday, Nov 1, 11 @ 10:49 am
Do we know how many of the 67% paid no taxes because they were able to use Net Operating Losses? The data for the 2011 tax year will be a lot more telling as to who is and is not paying IL Income Taxes.
Comment by SAP Tuesday, Nov 1, 11 @ 10:52 am
“If a corporation comes to Springfield and yells loud enough” the state will give a tax break.”
She didn’t seem to have a problem guaranteeing higher profits to ComEd & Ameren in state law.
Comment by SportShoz Tuesday, Nov 1, 11 @ 11:25 am
67 percent paid no income taxes, however, so that’s essentially correct.
I know it’s not exactly cause and effect…but MY income taxes increased by 67% this year…
Comment by tberry Tuesday, Nov 1, 11 @ 12:02 pm
This was a 2 hour meeting and these quotes are a small part of what we talked about in a very spirited discussion. It’s important to remember that our corporate tax code is only based on taxes paid by C-corps. Unless you are publicly traded, there is little benefit to organizing that way and it explains why today, as opposed to 20-30 years ago, many people organize as Sub S’s or LLC’s. Our code is horribly antiquated and not built for the economy we actually have in 2001.
Comment by Toi Tuesday, Nov 1, 11 @ 12:04 pm
Most corporations are small businesses. Typically, all income of a small business is spent…whatever is left after expenses goes out as income to the owner(s) — another expense. Thus no retained earnings.
The “net income” is thus taxed as personal income.
Absolutely nothing wrong with or surprising about that.
Comment by anon Tuesday, Nov 1, 11 @ 12:25 pm
Is Motorola having to give back any of their tax incentives with the 800 layoffs they announced last week?
http://www.latimes.com/business/la-fi-motorola-jobs-20111101,0,7185936.story
Comment by hisgirlfriday Tuesday, Nov 1, 11 @ 1:13 pm
Probably a good time to discuss overall tax reform.
Comment by Ahoy Tuesday, Nov 1, 11 @ 1:18 pm
Those Motorola layoffs were mostly in other states.
Comment by Rich Miller Tuesday, Nov 1, 11 @ 1:21 pm
—–Our code is horribly antiquated and not built for the economy we actually have in 2001.—-
or 2011
Comment by k3_Spfld_Chi Tuesday, Nov 1, 11 @ 1:37 pm
anon is right - good catch
As I recall, the replacement tax is required to be paid by all entities including S-Corps and partnerships. So, if thousands of entities pay no income or replacement taxes it is because they have no income (losing money or carrying forward losses or “paid” to owners in the form of salaries that are taxed at the individual rates).
Comment by bigdaddygeo Tuesday, Nov 1, 11 @ 2:08 pm