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* Journalists love surveys or studies that hand out grades. For instance, here’s a Tribune story entitled “‘D’ for Illinois in getting high-quality jobs for incentives”…
Illinois’ main economic development programs don’t have enough safeguards in place to make sure taxpayers get quality jobs from companies receiving incentive packages, according to a national analysis of state programs to be released Wednesday.
Good Jobs First, a Washington-based nonprofit that researches economic development subsidies, gave Illinois a D in the report, saying the state doesn’t require companies to offer workers health benefits or set goals on their pay. Those drawbacks more than offset the state tying incentives to jobs.
* Crain’s…
Illinois lags most other states in requiring that high-quality jobs result from its business relocation and retention incentives, a new study found. […]
“For a state that’s a big spender, to be rated this low and to be under the gun with high-profile deals like Sears or Motorola Mobility or CME, Illinois needs to be sure the jobs it is subsidizing pay good wages and have health care,” said Greg LeRoy, executive director of Washington, D.C.-based Good Jobs First, a non-profit critic of corporate subsidy programs, which conducted the study.
Click here to read the Illinois study. More info is here.
* The problem with this study is it looked at statutes and not results. So, for instance, a few of the major beneficiaries of state incentives over the past year have included Ford, Motorola Mobility, CME Group and Sears. All of those companies have solid wages and benefits at their headquarters and/or factories. But, the study doesn’t look at that.
Also, on the basics like job creation, job retention or training requirements, Illinois gets a perfect score in all but one of its incentive programs. In fact, in its “Performance Requirements” category, Illinois scores 140 out of 175, and has perfect scores 11 out of 15 times.
* However, the group does make a good point. The race to the bottom shouldn’t be happening here. We shouldn’t be using tax credits to create minimum wage jobs, which has happened in other states. Illinois has no market-based or even non-market based wage requirements, no healthcare coverage requirements and no other benefit requirements.
* One other point, according to Good Jobs First, states spent $11 billion on business incentives last year. Illinois spent $148.7 million in 2010. That’s just barely over 1 percent of the total spent nationally. We have a long ways to go before we’re spending more than other states.
…Adding… From Good Jobs First…
Rich,
Just thought I’d respond to your criticism that we only looked at statutes. We looked at both statutory language (statutes, administrative code, rules, other publications by the agency) as well as interviewed officials about what is typically included in subsidy contracts. DCEO was surprisingly difficult to get a straight answer and required us to file a number of FOIAs just to learn what the practices were with these programs. Ultimately, they rejected our most of our requests. Other states are very clear on what their programs require. Take, for instance, Virginia. It puts up documents detailing what each program requires. DCEO doesn’t do that. Conducting economic development on an ad hoc basis behind closed doors is not the standard set in other states.
While it’s true that Illinois does “only spend” $150 million in this fiscal year, we also know that many of the EDGE tax credits are not utilized (per Chicago Tribune investigation) because companies don’t have liabilities these days. Single Sales Factor apportionment, other than the down economy, is the most likely reason why many companies don’t have tax liabilities. When the economy bounces back in Illinois, it is quite likely that these blank check tax credits will bump up costs to the state. Since taking office, the Quinn administration has awarded $600 million in EDGE tax credits alone. These will cost the state at some point in time, even if it’s not today.
These state figures also ignore how much Illinois spends on local subsidies like TIF and property tax abatements. The last time anyone counted, in 2008, TIF alone diverted over $1 billion in property tax revenues from local governments. It could be the case that state aid to local governments is picking up the tab for the revenue loss from local subsidies.
Best,
Thomas Cafcas
Good Jobs First
…Adding More… Response from DCEO…
While it is not the department’s usual practice to engage in political rhetoric through the media, we feel it is important to address a number of the claims made by Thomas Cafcas to the Capitol Fax. After Mr. Cafcas contacted DCEO regarding film subsidies, we arranged a conversation with the director of the Illinois Film Office and other DCEO officials. Following that conversation, DCEO sent him the attached letter, which included the offer to provide any additional information he needed.
We make every effort to provide the public with adequate and timely information related to our programs, which is why much of the information related both to our services and our program expenditures is now posted online. It’s unfortunate that Mr. Cafcas seems to be more concerned with garnering headlines than serving as the public watchdog his agency purports to be. Were they genuinely interested in productive dialogue aimed at boosting job creation, perhaps they would have shared their findings with states – rather than just the media.
A fact that is missing from Mr. Cafcas’ letter is that the $150 million or so the state has made in EDGE investments, it has supported nearly $11.5 billion in actual and projected investment, and created and retained tens of thousands of jobs. Since January 2010, Illinois has added 108,100 jobs and saw the largest job gain in the nation (more than 30,000) in the month of October. We acknowledge there is still more work to be done, and this administration is committed to continuing our work to bring businesses to Illinois by highlighting our tremendous assets such as reforms to unemployment insurance and the workers’ compensation program; investments in our infrastructure, innovation and foreign trade; and of course highlighting our world-class workforce. Those are the headlines that matter to us in Illinois.
Thanks,
Marcelyn Love
Communications Manager
Illinois Department of Commerce and Economic Opportunity
* In other news, check out the bump to earnings per share for CME and CBOE from the tax package…
CME’s earnings per share will be about 4.76% higher than they would have been; CBOE’s will be 3.16%, [Chicago exchange analyst Niamh Alexander of Keefe Bruyette & Woods Inc.] estimated.
Did anybody buy stock this week?
* And while CME Group was lobbying for a big tax cut, it was also angering traders, who say the firm’s new rules could leave them out of a job…
CME said it will start incorporating data from electronic trading to set grain and livestock closing prices by next spring, a move that could sharply limit the role of the trading pit where closing prices have always been set.
We essentially leave it up to the governor’s office to make sure that these incentives aren’t being doled out to companies that don’t care about their employees. […]While the pits are typically quiet for much of the day, the final minutes of each trading session are marked by frenetic buying and selling because only pit-traded dealings are used to set the official end-of-day price. […]
CME has a long history of adopting rules that tend to push trading to the computer screens, in large part because once contracts are traded electronically, volume historically rises. […]
“Basically it will be a pit killer,” said Jim Clarkson, an analyst for A&A Trading. “My feeling is big traders, including funds with the big volume, want the business on screens. But I believe the more traders you have, the better markets you have. In the end, all electronic trade will be much more volatile with bigger price moves.”
* House Republican Leader Tom Cross is having a press conference today at 9:30 about the corporate tax rate. I may do a live blog. We’ll see. Check back…
House Republican Leader Tom Cross, of Oswego, who has called for rolling back the temporary increase in the corporate income tax, is expected to unveil legislation regarding that tax Wednesday morning.
* And Gov. Pat Quinn and Senate GOP Leader Christine Radogno both offered up observations yesterday…
“Sometimes when you have an emergency, where another state is trying to take a big employer… we’re not going to stand on the side of the road and watch them do it,” [Quinn] said. “We’re going to roll up our sleeves and protect our jobs.” […]
Senate Minority Leader Christine Radogno, R-Lemont, said she’s willing to say “no more” to individual business tax breaks until the state’s corporate income tax structure is reviewed.
“I don’t call the shots entirely, but I think that’s one approach,” she said. “We need to say, ‘We recognize we have a problem,’ I think you heard a lot of recognition of that today. We need comprehensive reform, and that may be one way to hold our feet to the fire to get it done.”
Many thanks to BlueRoomStream.com for the vid.
*** UPDATE 1 *** Leader Cross’ presser is starting, so let’s go to the ScribbleLive session feed. BlackBerry users click here, iPad and iPhone users remember to use the “two-finger” scrolling method…
*** UPDATE 2 *** From Senate Republican Leader Christine Radogno…
“We’re hopeful the House effort is successful and we’ll have the opportunity to repeal the tax increases that are driving jobs out of Illinois and hurting families. Our similar efforts in the Senate have so far fallen on deaf ears. But perhaps, with the spotlight now clearly shining on the failure of the Democrats’ tax increases and fiscal management, they will join with us to take a comprehensive look at Illinois’ tax structure, business regulation and over-spending.”
* Related…
* Illinois tax breaks could trigger demand for more
* Cat: R&D provision ‘a small step’: “Passage of this bill does not alter the fundamental dynamic for the state as a place to do business. From a financial standpoint, Illinois is a patient in critical condition. Yet Springfield continues to react in crisis mode, using Band-Aids rather than developing a long-term plan to get the state on the road to being healthy,” Dugan said. “We hope our political leaders can move away from this crisis approach and develop and implement a long-term strategy that moves Illinois away from being rated 48th out of 50 states in terms of business climate to a ranking that will encourage job creation, business growth and business involvement.”
* A little extra Sears background
* Sears will stay in Hoffman Estates if Quinn signs tax breaks
* Illinois Senate passes tax relief package to keep CME, Sears
* Sears EDA bill passes, heads to Quinn to sign
* Rosenthal: Tax wishes keep Sears, CBOE, CME Group home in Illinois for holidays and beyond - Incentive package, worth an estimated $371 million a year, heads to governor for approval
* Press Release: Chamber Commends Illinois Governor and Legislature’s Support for Business
* Press Release: Sears Holdings Applauds Illinois Lawmakers for Recognizing Company’s Value to the State
* Bill to ease rules for small cemeteries sent to governor
* Illinois lawmakers lighten up on smaller cemeteries
posted by Rich Miller
Wednesday, Dec 14, 11 @ 9:00 am
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–House Republican Leader Tom Cross, of Oswego, who has called for rolling back the temporary increase in the corporate income tax, is expected to unveil legislation regarding that tax Wednesday morning.–
And a companion budget bill, reflecting the loss of revenue?
Not that corporations do the heavy lifting when it comes to income taxes in this state. Individuals pay 85% of all income tax. More than 60% of corporations pay no income tax at all.
Comment by Anonymous Wednesday, Dec 14, 11 @ 9:12 am
==The problem with this study is it looked at statutes and not results… All of those companies have solid wages and benefits at their headquarters and/or factories. But, the study doesn’t look at that.==
Perhaps Illinois has to enshrine fewer rules than right-to-work states. As a relatively strong union state, It may be that the legislature relies on organized labor to ensure good wages and benefits. It may also be the case that Illinois’ higher minimum wage and other laws reduce the need to put protections into incentive bills.
Comment by Pot calling kettle Wednesday, Dec 14, 11 @ 9:23 am
I actually agree with Cross here and will go a step further. I think corporate and individual rates should be the same.
However, I think you need to make the budget cuts first and then reduce the rates. We can’t look at tax rates and budgets in vacuums anymore.
Comment by Ahoy Wednesday, Dec 14, 11 @ 9:42 am
Speaking of business moving out of state, the big shocker for me was the story in the Chicago Tribune “Playboy magazine moving to Los Angeles”. Local boy founds and builds business empire in Chicago and then leaves town after 60 years with lots of good paying jobs for LA. Another loss or Illinois.
Comment by Left Out Wednesday, Dec 14, 11 @ 10:04 am
–Local boy founds and builds business empire in Chicago and then leaves town after 60 years with lots of good paying jobs for LA. Another loss or Illinois. –
Hefner moved to Los Angeles in the 1970s.
Comment by wordslinger Wednesday, Dec 14, 11 @ 10:09 am
I told you so. I warned months ago that lowering the tax rate on electronic trades would encourage them to cut jobs for traditional traders that are taxed in Illinois.
Under Illinois’ Corporate Accountability for Tax Expenditures Act (HB 235 [Franks, ‘03]) the Illinois Dept. of Revenue is required to provide an annual report to the GA which tracks job creation using tax credits, including whether those jobs are full-time/part-time, the job classifications, and the average wage by classification.
BTW, unless I’m mistaken, those reports are subject to the Freedom of Information Act.
@Ahoy - We ALREADY gave businesses a huge tax break by not setting the corporate tax rate at the 8/5 cap under the Illinois Constitution. If we’re going to be lowering tax rates, we should be lowering the individual tax rate to the lowest rate possible under the 8/5 rule.
Comment by Yellow Dog Democrat Wednesday, Dec 14, 11 @ 10:12 am
I’d hate to have to explain to my voters why I was handing out corporate tax breaks while cutting funding for education and human services like child abuse, elder abuse, and domestic violence prevention.
Based on polling, that message doesn’t play well in any region of the state or with any voters.
Comment by Yellow Dog Democrat Wednesday, Dec 14, 11 @ 10:16 am
To my earlier point, I looked at the Good Jobs first report. Of the bottom 25 states on their list, only 7 are right-to-work states. Of the top 25, 15 are right-to work states (including 7 of the top 10). California, Washington, Oregon, Massachusetts, New York, and Pennsylvania all rank below Illinois. This suggests that if a state has progressive labor laws it does not need to write such protections into incentive bills.
Comment by Pot calling kettle Wednesday, Dec 14, 11 @ 10:35 am
I presume the business leaders will support the bill introduced by the Democratic targets to do that same thing Cross wants.
When he voted against raising the EITC for the working poor, Cross said the State can’t afford the lost revenue. Apparently when it comes to corporations, or $4 million estates, revenue loss doesn’t count.
Comment by reformer Wednesday, Dec 14, 11 @ 10:42 am
What took “Billboards” so long
Mussman, Costello already have a bill in
Better late than never we guess
Fire, Aim, Ready
BTW anyone got the number for IL for NEWT ?
Tom, Tom, Bueller, Bueller
Comment by CircularFiringSquad Wednesday, Dec 14, 11 @ 10:43 am
“DCEO was surprisingly difficult to get a straight answer and required us to file a number of FOIAs …”
Shocked, shocked I tell ya. And appalled.
Shocked AND appalled!
Comment by Michelle Flaherty Wednesday, Dec 14, 11 @ 10:45 am
YDD,
Follow the whole timeline…
1. IL spent decades in tax stasis, with rates frozen nearly 15 or so years. (fee hikes and tertiary taxes where raised)
2. It did NOT stay in spending stasis, with Ryan, Blago, and Quinn giving away the store to any group demanding increases in payroll, pensions, and other perks.
3. Revenue wise, this left the state at the mercy of the overall economic climate. When time were good, spending promises flowed, and when time were bad, they flowed more slowly.
In that context, IL a) spent itself into unneeded bankruptcy, b) cut funding to you wishlist above to pay for PENSIONS, c) was forced to raise taxes to pay PENSIONS, and now is forced to pay off bribes and flight threats to connected businesses to keep them from leaving the state.
I don’t blame your party as much as I blame the entire political class of IL. The blue model doesn’t work, at least not at this level of public employee stasis and greed.
Raise taxes more, and we’ll just leave. Start taxing us in Texas, Tennessee, Indiana and Florida, and we’ll just stop working.
We can afford a capitalist economy with a decent safety net and an education system. We just can’t do it Illinois-style.
A successful parasite lives in harmony with its host. A failed parasite kills the host and looks for more hosts. Illinois is the object lesson demonstrating the latter.
CME and Sears just said “stop killing us or we’ll leave” and the Illinois political class just said “OK, we’ll just suck more from everyone else.”
Comment by Bruno Behrend Wednesday, Dec 14, 11 @ 10:50 am
I seem to recall a tax plan that raised the corporate rate by 0.5 percentage points resulting in the personal and corporate rates both being 5 percent.
Makes sense if you’re a Republican. I mean corporations are people too so why discriminate with different tax rates?
How’d that plan fare in the House?
Comment by Michelle Flaherty Wednesday, Dec 14, 11 @ 10:52 am
–CME and Sears just said “stop killing us or we’ll leave”–
The state was killing Sears? They’ve been on the tax break gravy train for years.
The state was killing CME? They had a record third quarter profit this year, after the tax increase.
Comment by wordslinger Wednesday, Dec 14, 11 @ 10:54 am
Dear Mr Cafcas:
Under Illinois Corporate Accountability Act, those stats are available via FOIA, or you can get them from any lawmaker.
BTW: I just want to point out the huge pr problem for corporate tax cuts with the general public, and why i think the vote for CME/Sears is going to come back to bite lawmakers and the Governor right in the ballot box.
While it is true that the economy/jobs are a top priority for voters, two things are trumping that:
1). All of this talk of “running govt like a business” and “return on investment” make voters view state govt through the frame of “shareholder” and as a zero-sum game. Unless a tax cut actually creates or saves their own job, they not only perceive no benefit, they assume the money is coming out of their pocket, some way, some how.
2) 80% of voters distrust state govt, so they are inclined to believe the worst about anything they read or hear.
Comment by Yellow Dog Democrat Wednesday, Dec 14, 11 @ 10:55 am
=To my earlier point, I looked at the Good Jobs first report. Of the bottom 25 states on their list, only 7 are right-to-work states. Of the top 25, 15 are right-to work states (including 7 of the top 10). California, Washington, Oregon, Massachusetts, New York, and Pennsylvania all rank below Illinois. This suggests that if a state has progressive labor laws it does not need to write such protections into incentive bills.=
There was an article that was published I believe last week, stating that right to work states are worse for the economy. I believe the article was about Indiana, and about how pro right to work people praise lower labor costs for corporations and job attraction. I don’t have the article with me, but I believe the info was based on research, and some researchers stated that lower wages actually harm the economy.
Comment by Grandson of Man Wednesday, Dec 14, 11 @ 11:00 am
Why do I have the feeling that there is great risk that the legislature will give way to the corporations on everything and then all of us individual human being type taxpayers will be carrying the full burden?
Because that’s how corporate America seems to want things and our legislators (both at state and federal levels) seem to be far more committed to pleasing them than us.
Comment by Aldyth Wednesday, Dec 14, 11 @ 11:01 am
=2. It did NOT stay in spending stasis, with Ryan, Blago, and Quinn giving away the store to any group demanding increases in payroll, pensions, and other perks.=
I don’t necessarily feel this way. As a state worker, my workload has almost doubled, and I haven’t got my small raise. I see no harm in trying to negotiate for better pay; that to me is the cornerstone of freedom and capitalism. If Sears and CME can successfully lobby for tax breaks, anyone else should be able to do the same.
And what’s more, states that don’t have Illinois’ pension problem still have sluggish economies. Wisconsin had a bad jobs month in October, and the state has a two-year freeze on income tax for corporations.
Comment by Grandson of Man Wednesday, Dec 14, 11 @ 11:08 am
Sorry, but I would like to add one more thing: Illinois does have the massive pension issue, but it doesn’t have the political turmoil of Ohio and Wisconsin. So there is a tradeoff. There is not the partisan rancor in Illinois that there is in the other two states. I think that bodes better for our economic future.
Comment by Grandson of Man Wednesday, Dec 14, 11 @ 11:11 am
…Wisconsin has a two year income tax freeze for corporations that want to relocate there (sorry again for not including that).
Comment by Grandson of Man Wednesday, Dec 14, 11 @ 11:13 am
So income taxes get raised to balance the state’s terrible financial state. Later it comes out the pension plans will require $1B more than first thought. There is something around $5B in unpaid bills waiting at the Comptroller’s for revenue to come in with at least an additional $1.9B in bills not released by HFS. Now corporate exemptions kick in. TIF property taxes exemptions whack some more. Seems the available pots of money just shrunk big everywhere. If you are not a big gun, so sorry. Merry Christmas.
Comment by zatoichi Wednesday, Dec 14, 11 @ 11:17 am
===TIF property taxes exemptions whack some more.==
That has nothing to do with the state budget.
Comment by Rich Miller Wednesday, Dec 14, 11 @ 11:20 am
Did the ILGA ever provide a cost est. of extending those tax incentives? Last I saw was basically, “No one knows”. And that was the day before this vote.
Comment by Shock & Awww(e) Wednesday, Dec 14, 11 @ 11:42 am
To clarify, I’m not referring to the CME/Sears/theater credit, etc., but to extension of the provisions set to sunset (ethanol, etc.).
Comment by Shock & Awww(e) Wednesday, Dec 14, 11 @ 11:44 am
YDD, having corporations pay more than the individual rate is not a tax break. Yes, they do not have the higest 8/5 ratio that the GA could have gone to, but the 8/5 is a cap not a mandate to have the corporate increase by the highest it can.
If you think they should pay more, fine, that’s your opinion, but I fail to see how paying more is a break.
Comment by Ahoy Wednesday, Dec 14, 11 @ 11:45 am
“Cross: The bill also reduces the corporate income tax by .25% anytime the state’s unemployment rate increases by .3% in 4 months.”
Does the rate ever go back up when unemployment goes down? Do any other states have policy like this?
The GOP likes to complain a lot that certain tax policies encourage people to work less and not want to make as much money, so wouldn’t this particular part of the Cross idea encourage businesses to eliminate positions and workers in order to get a tax break? Isn’t that a little perverse?
Comment by Aaron Wednesday, Dec 14, 11 @ 11:47 am
The criticism of DCEO is right on the money. The scary part is I’m not sure they even know what the rules are.
Comment by Downstate Illinois Wednesday, Dec 14, 11 @ 11:54 am
You can tell that Good Jobs First is not from Illinois by their surprise at DCEO’s ineptitude and recalcitrance. This should be no surprise to anyone who is at all familiar with DCEO.
The DCEO wheeler dealers are still following Rezko’s mantra – “Rules are not meant to be followed by people of consequence.”
Comment by Honestly Wednesday, Dec 14, 11 @ 12:09 pm
DCEO and before it, DCCA, have been notorious for a long time for being sloppy with their books and stats, as well as for being a major distributor of pork projects for whatever governor is in charge at the time. If any agency is due for a complete “clean sheet of paper” reboot, DCEO is it.
Comment by Newsclown Wednesday, Dec 14, 11 @ 12:11 pm
The CAT Flack is really over the top His bosses pay zero state corp tax, planning to import jobs from China to IL and build bigger factories in IL and the get the R&D credit which means they get a grant and he still sez it is a “small step”
What does this dude want permanent tee time at Weaver Ridge, new yellow Jag convertible?
Comment by CircularFiringSquad Wednesday, Dec 14, 11 @ 12:12 pm
–“We’re hopeful the House effort is successful and we’ll have the opportunity to repeal the tax increases that are driving jobs out of Illinois and hurting families. Our similar efforts in the Senate have so far fallen on deaf ears. But perhaps, with the spotlight now clearly shining on the failure of the Democrats’ tax increases and fiscal management, they will join with us to take a comprehensive look at Illinois’ tax structure, business regulation and over-spending.”
So repeal the corporate income tax increase, THEN have a comprehensive look at state tax structure?
Could we have a list of all the businesses being driven out of Illinois because of the tax increase?
Finally, why not just introduce a bill rolling back the tax increase, along with a companion budget bill? You have ideas, time and staff to do so. Do it.
Comment by wordslinger Wednesday, Dec 14, 11 @ 12:23 pm
= DCEO was surprisingly difficult to get a straight answer and required us to file a number of FOIAs just to learn what the practices were with these programs. Ultimately, they rejected our most of our requests. =
Could they get any of the information they needed from the Tax Expenditure Report by the Comptroller?
Comment by Dirty Red Wednesday, Dec 14, 11 @ 1:22 pm
@Ahoy - Business groups demanded that Democrats reduce their corporate tax rate from their initial proposal in exchange for softening their opposition. The relative tax burden on individual taxpayers increased as a result. No matter how you slice it, corporations got a tax break and individuals are paying more as a result.
@Bruno -
Let’s get our facts straight, mmmkay?
1) Pension underfunding stretches back atleast to Jim Edgar and Jim Thompson, and according to the SJR, to the 1950’s.
2) It is not a “Blue Model”, but a Purple Model. Democrats have generally leaned toward “pay-as-you-go” government, preferring tax hikes that protect popular programs and pay our bills on time. Republicans have opposed tax hikes but haven’t been exactly leaders in cutting spending either: that’s why you get mostly silence or gibberish when you ask Republicans to name specific cuts.
3) Historically, public employee unions and public works contractors have been huge supporters of the GOP, especially AFSCME, Operating Engineers, and IEA…so let’s not pretend that this is the result of some Democratic-union cabal.
4) Given all of that, and that the public has generally supporting a combination of increased spending while opposing higher taxes for the past 15 years, the natural result was borrowing, and the easiest way for bipartisan borrowing was by skipping pension payments.
5) You are ABSOLUTELY correct that individuals and corporations have enjoyed a low tax rate for the past several decades. They did so because they were running up a tab at the pension systems, and now those IOU’s are coming due.
I suppose that maybe you’re right that some corporations will just take their bat and go elsewhere. But Illinois has led the Midwest in job creation since raising its corporate income tax, which tells me that there are plenty of folks waiting in line to take your place.
Why? Because a high-quality workforce, good public schools, good transportation, communications, and energy infrastructure far outweigh corporate tax rates…especially when so many companies don’t pay any taxes anyway.
BTW, its not my spending wishlist, its the voters’ spending wishlist. Its been remarkable consistent over time, across regions of the state, and across party lines.
Comment by Yellow Dog Democrat Wednesday, Dec 14, 11 @ 1:23 pm
I might have been more open to Cross’ proposal had it come before we took this one at a time approach. But since he’s proposed it NOW, we’re going to get the business community coming at the state from at least two angles: individual relief and an overall lower corporate rate.
Say we had lowered the corporate tax rate before all of these companies started coming forward: Wouldn’t the better way to deal with CME/CBOE have been to talk about modernizing the tax code for e-comm? I don’t see how the tax code would deal with cloud transactions.
Comment by Dirty Red Wednesday, Dec 14, 11 @ 1:33 pm
And before someone repeats that tired cliche about the private sector creating jobs, let me repeat myself:
Bears don’t defecate in the woods because they like to, but because they have no other choice.
“Job Creation” is a waste product for businesses, not their goal. Their goal is maximizing profits, and if they can figure out a way to increase profits without creating jobs — like getting no-strings-attached tax breaks, they always will. Even when it is not in their long-term best interests.
Comment by Yellow Dog Democrat Wednesday, Dec 14, 11 @ 1:53 pm
Gotta’ love Caterpillar chief exec Doug Oberhelman. In 2009, a year that saw only three U.S. corporations lay off more workers than Caterpillar, Oberhelman took home just under $3 million. His last year’s paycheck: $10.4 million. Also, Caterpillar workers, meanwhile, have a new six-year contract that, one news report notes, includes no wage raises and a big boost in health care premiums. Caterpillar seems to exploit tax loopholes as systematically as employees. From 2004 to 2009, the company paid in Illinois income tax only 1.04 percent of its $30.4 billion in earnings.
Comment by globalguy Wednesday, Dec 14, 11 @ 2:30 pm
How about a requirement that whoever proposes a tax cut also specify where equal spending cuts should be made so as not to aggravate the deficit and balloon unpaid bills? That requirement might slow down legislative eagerness for more and more tax expenditures.
Comment by reformer Wednesday, Dec 14, 11 @ 3:08 pm
=“Job Creation” is a waste product for businesses, not their goal. Their goal is maximizing profits, and if they can figure out a way to increase profits without creating jobs — like getting no-strings-attached tax breaks, they always will. Even when it is not in their long-term best interests.=
Very well put, as far as the corporate environment.
Wisconsin cut a lot of money out its budget. Now the state is losing jobs. It sounds risky to make drastic cuts when the economy is weak. Such cuts must have had a bad economic impact when there is no vigorous job creation–all of that money out of local economies.
Spending is a big component in job creation. I watched the GOP debate in Iowa the other day, and Rick Santorum was talking about a “petri dish” for job creation–low taxes and regulations, the old trickle down idea.
Comment by Grandson of Man Wednesday, Dec 14, 11 @ 3:22 pm
In response to CAT, here’s an idea: Let’s repeal the single sales factor and use the revenues to lower the tax rates for all the businesses and people who DO pay taxes.
Give CME some credit. Yeah, they whined, but then they targeted what the problem was and negotiated on how to resolve it.
If CAT’s gonna take the state hostage it’d be nice to have a list of demands.
Comment by Michelle Flaherty Wednesday, Dec 14, 11 @ 3:59 pm
Cafcas stated: “Single Sales Factor apportionment, other than the down economy, is the most likely reason why many companies don’t have tax liabilities.” A misleading statement.
Single sales factor apportionment is the method Illinois uses for dividing the income of a multistate taxpayer (sales in Illinois divided by Sales everywhere). Think of income as a pie and the apportionment formula as the directions for how you slice the pie.
The only way the Cafcas statement could be true would be if an Illinois-based company makes no sales within Illinois and sells everything to out-of-state purchasers - a highly unlikely situation. Or, if single sales factor apportionment slices the income attributable to Illinois so low that the company has enough Illinois tax credits to offset all of that income. However, this latter situation would require a significant investment in Illinois - think investment tax credit or research and development credit - so the State would still be benefiting through employment and purchases and property taxes.
Comment by Just the Facts Wednesday, Dec 14, 11 @ 4:18 pm
Boy, a lot of people do seem to have somehow forgotten about the 800 pound elephant in the room. We don’t HAVE the money we’re giving away, we have a deficit. Folks, we already spend more than we take in. Stop helping.
Comment by steve schnorf Wednesday, Dec 14, 11 @ 4:36 pm
Grandson: I long for the WI and OH confrontations. The sooner we confront, the sooner we turn IL from its unsustainable path. It’s what IL needs.
Wordslinger: I didn’t say the businesses were accurate, I said that it was their argument. Maybe they are bluffing, but they do have the option of lower cost states.
YDD: No disagreement on the pension underfunding, but the pensions are too rich, as are the health benefits. They all need to be cut back. Had they been funded, it would have a) raised taxes, or b) cut funding for all those programs you like so much, or c) both.
Union support of GOP is why the party is so morally bankrupt and worthless. Your party lives off of the bureaucracies built on patronage. It’s the party of government, and I would concede that it isn’t all bad (just out of control in IL).
For the GOP, sucking up to unions (and the army of useless K12 administration is toxic and stupid. Here’s why.
It splits our party between fat boss Hogs (mayors, superintendents, local fiefdoms) and the people that actually have to pay for it.
The very rich are split evenly between Dem and Rep, because the CClub Rep. can afford the obscene property taxes and public trough feeding.
It’s the mid-range guy and the small business man who can’t make a go in such a benighted state. So yeah, the ILL GOP is part and parcel of the Kleptocracy that is Illinois.
Last, I’d like to see your stats on job creation, so point me to it. Note that every government job requires quite a few businesses and individuals to fund it. The idea that ANY job, public or private, contributes to the society is a debatable presumption.
Do we want a good school system? yes. Do we need an army of worthless employees in 880+ needless bureaucracies to produce that system? No, and there is plenty of evidence that we can get a great education system with out the bloat we have now.
Comment by Bruno Behrend Wednesday, Dec 14, 11 @ 4:37 pm
Bruno, welcome back. How’s it going with abolishing those school districts?
You are one of several commenters on here I consider capable of really thoughtful comment. But frequently many of you more conservative types only talk about what’s wrong or propose undoable solutions to problems, which therefore really aren’t solutions at all.
Remembering that we have a D Governor, a D GA, and we are a state that is going to vote for President Obama, what do you suggest we actually try to DO about our tax structure, our overspending problems, etc? Remember, at least potentially actually doable things.
Comment by steve schnorf Wednesday, Dec 14, 11 @ 4:55 pm
You are correct Bruno.
Wordslinger and others seem to have no interest in doing the math as it effects the 10% of large C Corporations that pay the over 12 percent income tax.
I am not a no tax guy.
The system has been gamed for those who know how to play and are not required to show profit as C Corporations.
Most of the large businesses are S Corporations and are subject to a one percent income tax.
The manufactures are required to be C Corporations and pay over 12% income tax.
They are leaving in droves.
Open your eyes.
Comment by gg Wednesday, Dec 14, 11 @ 4:55 pm
I am a political liberal, but I also try to read and think about economics realistically, as a problem solving exercise. What I have read and my interpretation of it leads me to believe that corporate income taxes are silly. What the corporations pay, they either pass on to consumers in the form of higher prices or take out of their employees in reduced wages and benefits. But they also go to great and expensive lengths not to pay, and consumers and workers wind up paying the cost of that as well. In my opinion the corporate income tax should be abolished, but the personal income tax should be made strongly progressive, so that wealthy individuals pay their share for supporting the society that has rewarded them with such big incomes, and can provide educational opportunities, basic health care, public safety, etc. that everybody should have access to.
Comment by jake Wednesday, Dec 14, 11 @ 5:09 pm
Steve,
The battle continues.
http://gettingsmart.com/edreformer/fund-the-child-not-the-district/
Given that Fordham, and other think tanks are now looking into the uselessness of school districts, maybe we can see some action.
It was a Democrat who pushed a radical consolidation this year, though that was mostly to sweep the cash reserves from flush districts (i.e. those who overtaxed their residents and haven’t caved to the latest union contract) into county pools to be redistributed inside the county.
Bad ideas become ingrained, and it will take a few election cycles (or even decades) to get the citizen to see the idiocy of these greedy entities that accomplish nothing.
____
To your next question… first off, we have “D Governor, a D GA, and we are a state that is going to vote for President Obama” because we have had a Republican Party that caved to unionism decades ago, and lost any credibility as a party of fiscal discipline. Therefore I reject your premise that Republican need to concede defeat before proposing real solutions.
I have no interest in proposing tepid policies that “might get past the Democrats.” Mike Madigan is doing just fine proposing temporary spending caps, phased out tax increases, and restrictions on the union monster Jim Thompson let in the front door.
He has no choice. There is no one else in the state with the power or a lick of sense, and the R party has been too weak for too long to make a difference. Hell, they all voted for this crap (see 59-0 vote in favor of “early retirement option” in the late 90s)
My view is that one propose real solutions. Here in IL, that means spending cuts - painful ones.
I like the idea of a line-by-line review, gutting any program or department that isn’t needed. (yes, we will find plenty)
Closing one or two of our universities wouldn’t be the end of the world. Sell them to DeVry or Phoenix.
Given the massive abuses of pensions, how about making everyone with a pension over $75K pay 50% of their healthcare. Make those with $100K pay for all of it healthcare.
Pensions are constitutionally guaranteed, but health benefits are not. After all, they are comparatively rich, so they can afford it. (or so my lefty friends tell me)
How about a debt moratorium on local governments, allowing only for refinancing to lower payments. Disallow rolling over expiring (paid off) bond issues. This will slowly bring down property taxes as well. The bond dealers in IL have had a nice ride on the gravy train for the last 30 years. Tell them its over for a while.
Next, Illinois needs to give people property tax relief in the form of a) hard caps on property taxes, and b) phasing out revenue sharing, thus forcing local government and school districts to engage in serious cut backs.
Will this be “painful?” Yes. But it will put the pain ON the public employee class, and provide some relief for the property tax payer.
Given the upcoming retirements, and impact this will have on local levies, you can go my route, or wait for the people walking away from their properties due to property taxes instead of mortgages.
Lastly, Illinois needs constitutional spending caps, inflation + population growth, with no exceptions. If the citizens want to spend more, let them say so in a referendum.
Of course, you will laugh, and say all of the above are “impossible,” so why bother talking about them, right? My view is that the only reason they are “impossible” is because no one is talking about them.
If people honestly believe that the economy will roar again someday, and bail them all out, they are in for a rude awakening. Every day we keep IL in this configuration, it gets weaker and weaker, and less able to control its destiny.
Illinois is way past half measures working for it. There. I just wrote a platform for a party. Too bad there isn’t one in IL that will run on it.
Comment by Bruno Behrend Wednesday, Dec 14, 11 @ 9:11 pm
Right Jake. Every manufacturer I have ever spoken to about this candidly admits that any increase in taxes or fees goes right in the product. My favorite was the guy who said, “you don’t think I’m going to pay for that do you?
Comment by Way Way Down Here Wednesday, Dec 14, 11 @ 9:18 pm
Steve,
I forgot my manners. Thanks for the compliment.
Comment by Bruno Behrend Wednesday, Dec 14, 11 @ 9:24 pm
Gg, I wish state tax and fiscal policies were the be-all and end-all to job creation. That would be an easy fix.
They’re a factor, but a relatively small one compared to demand, low-wage international labor, currency manipulation, lousy trade deals, credit availability, etc.
As far as manufacturing goes, jobs have have been leaving in droves — from the United States, not just Illinois. Some of that has to do with increased productivity, while a lot of it has to do with shipping overseas to low-wage countries the manufacture of low-margin products.
Check it out, state by state, from 2001 to 2008.
http://www.americanmanufacturing.org/china-job-loss/stateinfo
Comment by wordslinger Thursday, Dec 15, 11 @ 8:15 am
FYI, TIF districts can impact the state budget in two negative ways, by affecting the school funding formula and by allowing the TIF to collect sales tax increments as well as property tax increments (though I understand the latter is being phased out).
Incidentally, I owe Good Jobs First a debt of gratitude for the resources it provides for better understanding TIF, Comprehensive Annual Financial Reports and tax expenditures in the form of incentives.
Comment by yinn Thursday, Dec 15, 11 @ 8:42 am
*oops, for clarification it’s the sales tax increments being phased out*
Comment by yinn Thursday, Dec 15, 11 @ 8:44 am