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* The latest rant from the Tribune editorial board…
More broadly, this state has to revamp a tax policy that gives all employers incentive to leave the state, but tries to lure select employers to stay. The state imposed a whopping increase in personal and corporate income taxes early this year. Yet, as the Tribune reported Friday, since Gov. Pat Quinn took office he has pledged at least $636.5 million in tax credits, grants and training funds to companies to hire or to keep jobs in the state.
“All employers”? Really? How is the Tribune gonna leave? And when?
Snark aside, the story about the total incentives follows the usual pattern of focusing on the largest possible number. That $636.5 million is spread out over at least ten years, so the fiscal impact each year is minimal. And the Trib buried this valuable nugget deep inside the piece…
[Greg LeRoy, executive director of Good Jobs First, a nonprofit that researches economic development subsidies] said he was pleasantly surprised by the cost per job on the 2011 packages. Many states, he said, offer more than $100,000 per job. A company in upstate New York, he added, got a package worth $1 million per job.
So, we have reasonable incentives? Really? Huh. That doesn’t jibe with the common refrain of “We’re so screwed up we have to offer huge bribes to keep businesses here.”
No Illinois incentive comes even close to the $100,000 per job that “many states” offer. And keep in mind that even that $100,000 is spread out over many years. The highest per-job incentive Illinois offered was spread out over 13 years…
The state pledged nearly $61,000 for each of the 70 jobs Evraz Inc. North America promised to create in Chicago. That figure includes $4.2 million in tax credits the company can claim over the next 13 years and $50,000 in training funds.
And it’s not actually $61,000 per job because instead of 70 jobs, the company already has 100 employees in Chicago. And many of these jobs are high-paying executive positions.
We should definitely keep a watchful eye on these incentive programs, but let’s also put the annual cost in perspective.
…Adding… From our always valuable commenter Wordslinger…
–More broadly, this state has to revamp a tax policy that gives all employers incentive to leave the state, but tries to lure select employers to stay.–
More than 60% of Illinois corporations don’t pay any state income tax. That would seem to be a marketing tool to attract business, not a reason to leave.
* Meanwhile, speaking of taxes, I told subscribers about this deal on Friday morning…
House Democrats on Sunday offered a scaled-back, $250 million-a-year, tax-break package designed to keep Chicago’s two financial exchanges and Sears Holdings Corp. from moving out of Illinois.
The package would provide approximately $100 million in combined tax relief annually for CME Group Inc., which owns the Board of Trade and the Chicago Mercantile Exchange; and Sears Holdings Corp. It also proposes new tax credits for Chicago’s theater scene.
The 220-page amendment filed Sunday by Rep. John Bradley (D-Marion) has been tweaked so there will be a continuing source of revenue unlike earlier versions where taxpayers eventually would have been on the hook.
“The biggest change is we can now actually pay for this,” Bradley told the Chicago Sun-Times.
* The funding mechanism…
The cost would be completely offset by a resurgence in state corporate income tax receipts that is expected with the expiration of a [federal] tax break that allows businesses to accelerate their deductions for capital investments through 2012, Bradley said.
* Details…
The new package, like the earlier one, would reinstate companies’ abilities to use past net operating losses to offset corporate income tax liabilities, but only up to $100,000 a year. That tax break has been temporarily suspended to help ease the state’s budget crisis.
The estate tax deduction would rise from $2 million to $3.5 million over two years, rather than to $5 million, as had been proposed earlier.
The earned income tax credit for low- and middle-income families would rise from 5 percent to about 7.5 percent, rather than the 15 percent put forward earlier.
Personal income tax exemptions would be adjusted upward for inflation in fiscal 2013 only, but an earlier proposal to index the exemptions to inflation longer-term was dropped, Bradley said.
* But, there are problems…
Leaders of Community Unit District 300 in Carpentersville have come out strong against the new plan to give Sears Holdings Corp. tax breaks, saying it goes against a tentative agreement reached two weeks ago.
“The rug has once again been pulled out from under 21,000 students at the last minute,” Superintendent Michael Bregy said in a statement late Sunday night. “We were so close to feeling that democracy still had a home in Illinois, and now we’re back to square one.”
How that will play out in Springfield will become clear this afternoon, when a House committee is scheduled to have the first public hearing on the new proposal.
* And the chief sponsor of the underlying legislation is, as always, pessimistic and unenthusiastic…
The chief sponsor of the measure, House Majority Leader Barbara Flynn Currie, D-Chicago, told me on Sunday that she doesn’t yet know what’s in the deal and cautioned that it still may be too fat for the cash-strapped state.
“It sounds somewhat stripped down, but I don’t know how much stripped down,” she said. “I think that (the bill as first proposed) is a little top-heavy.”
“A lot of pressure” is coming from Mayor Rahm Emanuel and Gov. Pat Quinn to save the exchanges, Ms. Currie said. If the Legislature goes along, it “makes sense” to also help working people with a companion increase in the state’s earned-income tax credit, rather than just enacting “corporate welfare.”
The deal — if there is one — will be filed as an amendment shortly before the committee’s scheduled 1 p.m. meeting, Ms. Currie said. Asked if the votes are there for the House and the Senate to pass something when they convene for a one-day session Tuesday, she replied, “I don’t know.”
The full legislation is here.
posted by Rich Miller
Monday, Nov 28, 11 @ 10:13 am
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–More broadly, this state has to revamp a tax policy that gives all employers incentive to leave the state, but tries to lure select employers to stay.–
More than 60% of Illinois corporations don’t pay any state income tax. That would seem to be a marketing tool to attract business, not a reason to leave.
Comment by wordslinger Monday, Nov 28, 11 @ 10:27 am
This situation has reached the point of unintentional comedy. The state is struggles for funds, stiffs its creditors, including schools and social service agencies, passes dishonest budgets, denies contracted raises to its employees, and now presents hugely profitable businesses with free cash??
Sorry to say but Quinn is way out of his depth here. But would Governor Brady have done any better? I think not.
We can only wonder what type of deals Blagojevich would be making with CME and Sears were he still in office.
Comment by DuPage Dave Monday, Nov 28, 11 @ 10:33 am
If the CME deal goes through, they’ll be able to tell their board they’ve found a funding mechanism for the $550 million the exchange has put up for the MF Global disaster.
Comment by wordslinger Monday, Nov 28, 11 @ 10:41 am
What ever happened to “Budgeting for Results”?
According to the National Conference of State Legislatures, every $1 invested in early childhood education returns $8 to the taxpayers.
Every $1 invested in community-based care for seniors saves taxpayers about $10 in nursing home costs.
What is the return-on-investment to the taxpayers for subsidizing CME and Sears?
Comment by Yellow Dog Democrat Monday, Nov 28, 11 @ 10:49 am
“60% of corporations don’t pay any income taxes”
Again, is this ALL C-corps?
S-Corps and LLC’s don’t pay taxes - their owners do.
Comment by Downstate Monday, Nov 28, 11 @ 10:57 am
expiration of the of the accelerated depreciation schedule doesn’t create a permanent revenue stream because the old federal d. schedule will go back into effect, but the state tax breaks being provided are permanent..and the new growth in corporate income tax revenues dry up in three years as a result of the temporary nature of the tax. Also, the amendment takes away all enforcement powers of the dept. of revenue–this thing is a corporate tax lawyer’s dream!
Comment by spin cycle is def on! Monday, Nov 28, 11 @ 11:00 am
It looks like we we are no more screwed up than many other states. Everbody seems to have come to the conlcusion we need jobs.Even in Illinois we
are finally agreeing we need jobs. Business also
should realize how important American jobs are. Look at Dell they shipped jobs to Thailand only to find out their plant will be underwater for months.Lets keep work in America, the cheap goods we buy at Wal-Mart are costing us a ton.
Comment by mokenavince Monday, Nov 28, 11 @ 11:04 am
Hmm… so the “stripped down” version of the CME/Sears/everything else package basically leaves all of the CME/Sears stuff in, somewhat reduces the breaks for other corporations, and greatly reduces the breaks for working families.
On top of that, this is “paid for” by pretending that the federal depreciation expiration is new revenue. It isn’t - it is and was expected revenue that could and should be used for other areas.
So once again this bill is going to blow a major hole in the state budget that will devastate state services.
Comment by dave Monday, Nov 28, 11 @ 11:09 am
there’s no question in my mind that pat quinn is doing a better job for illinois that bill brady could have. given brady’s penchant for getting taxpayer monies for his private activities, what we could have expected from the republican was more hands in our pockets, with nothing to show for it. could brady have gotten along better with the speaker? or the majority leader? doubtful. it’s much more likely that bill brady would have been another governor hairdo, trying to put the legislative leaders “in their place.” all the while, he’d be making sure that he personally benefited from public funds, even if it screwed the rest of us. there’s no question in my mind that quinn is better than brady, none at all…
Comment by bored now Monday, Nov 28, 11 @ 11:11 am
so is it paid for? or will it cost the State $250 million a year? Looks like they are saying two different things.
Comment by Ahoy Monday, Nov 28, 11 @ 11:17 am
Thanks YDD for reminding me of “Budgeting for Results” — the latest and greatest Quinntacular plan to make doing nothing look like doing something.
State agencies are now required to submit reams of data to justify spending a nickel on serving disabled children, or providing home care for the elderly or other services that Illinois and every other state provides.
But somehow it is just OK to throw $250 million at profitable businesses.
I’d love to see how that one fits into the B4R spreadsheet.
Comment by DuPage Dave Monday, Nov 28, 11 @ 11:34 am
===State agencies are now required to submit reams of data to justify spending a nickel on serving disabled children, or providing home care for the elderly or other services that Illinois and every other state provides.===
You’re way overstating it, but making sure state programs actually produce results would be a good thing.
===But somehow it is just OK to throw $250 million at profitable businesses.===
That’s a legislative decision. You’re a bureaucrat, so deal with it. You want to be a legislator, pass petitions and run.
Comment by Rich Miller Monday, Nov 28, 11 @ 11:42 am
Running through HAM003 at the moment. Looks like a few ornaments may remain (such as the “live theater production tax credit”???).
Be interesting to see what happens in committee today and what else is in the final draft.
Comment by Shock & Awww(e) Monday, Nov 28, 11 @ 12:59 pm
As I recall, all corps (including S corps) and partnerships are required to pay some (2.5% or 1.5%) replacement tax. It seems to me that if 60% of corps don’t pay tax that is because the corps aren’t earning taxable income.
Comment by bigdaddygeo Monday, Nov 28, 11 @ 1:36 pm
The new amendment basically means that the shareholders of CME get about $18000 per each and working families about $90 each from the tax package.
And again, no, this isn’t “paid for.” It is only paid for if you somehow determine that the depreciation revenue is magically new revenue and not previously expected.
So in other words… massive tax breaks, mostly for a couple of select corporations, which will mean even more budget cuts that working families will feel the brunt of.
Comment by dave Monday, Nov 28, 11 @ 1:54 pm
“It seems to me that if 60% of corps don’t pay tax that is because the corps aren’t earning taxable income”
And why, pray tell, do corporations neglect to declare income in the State of Illinois? Could it have something to do with our tax rate? Why not just sweep all the profits out of Illinois and invest in a friendlier tax regime?…which is, of course, what is already happening
JBP
Comment by JP Monday, Nov 28, 11 @ 2:07 pm
===And why, pray tell, do corporations neglect to declare income in the State of Illinois? ===
Single sales factor, federal tax issues, etc. Lots of reasons. No need to go all tinfoil hattish on us.
Comment by Rich Miller Monday, Nov 28, 11 @ 2:23 pm
SB 397 has never been to the floor, so this can’t be a “one day” session. It will have to be read on second tomorrow and then on third Wednesday unless they have perfuntory today which I don’t see scheduled.
Comment by Jaded Monday, Nov 28, 11 @ 3:05 pm
Assuming the $100 million tax break per year cited by Rich above for the CME is the actual number,that would be interesting because in the Tribune on Nov 9 the CME tax break number cited was approximately $85 million over two years, according to Rep Currie.
So from Nov 9 to Nov 28 the tax break goes from about $42.5 million a year to $100 million a year or a 135% increase in the estimated yearly tax break to the CME. Now that boys and girls is real lobbying!
Comment by Rod Monday, Nov 28, 11 @ 3:36 pm
That would be impressive lobbying, but the numbers they have been using are $100m for CME and Sears combined. $85m of that is CME.
Comment by Dave Monday, Nov 28, 11 @ 4:39 pm
Rich- Thanks for the invite, but I can’t be a bureaucrat if I run in a partisan election. I’m planning on retiring one day so I’ll stay put.
So in the meantime I’ll just make use of this fine blog to share my opinions on my off days and after work.
Comment by DuPage Dave Monday, Nov 28, 11 @ 10:43 pm