IBJNews

Illinois lawmakers under gun over CME tax breaks

Back to TopCommentsE-mailPrintBookmark and Share

Lawmakers in Illinois, where major employers are threatening to leave the state if their tax burden isn’t reduced, return to Springfield on Monday to consider what they can’t afford to do.

They can bow to pressure from businesses, cut their tax load and deepen the state’s $8 billion budget hole by an additional $325 million. Or they can run the risk that CME Group Inc., operator of the Chicago Mercantile Exchange and the Chicago Board of Trade, and Sears Holdings Corp., parent of Sears and Kmart, will flee the state.

CME is considering moving its headquarters to Indianapolis or possibly Carmel, a move that could bring 1,700 or more high-paying jobs to central Indiana.

Giving in is “a lousy policy, and it opens the door to the next business and the next business and the next business,” said Kent Redfield, a University of Illinois at Springfield political scientist. “It makes good political sense but it’s not sound financial policy.”

Eleven months after passing record income-tax increases that halved a $13 billion budget deficit, the Democrat-dominated Legislature is dealing with the blowback.

Lawmakers—with no Republican votes—approved $7 billion in personal and corporate income-tax increases in January. That provoked objections from businesses such as Caterpillar Inc. and Deere & Co., and poaching expeditions from governors seeking to lure unhappy Illinois employers. Sears and CME both said during the third quarter that they might leave without relief.

CME officials met with Indianapolis Mayor Greg Ballard in Chicago on Dec. 2 to discuss a move, adding to the pressure on lawmakers.

llinois Gov. Pat Quinn said Ohio offered $400 million in incentives to lure the company to Columbus, according to a report in the Cleveland Plain Dealer.

“It’s a very difficult situation and we’ve created this ourselves,” Tom Johnson, president of the not-for-profit Taxpayers’ Federation of Illinois.

The House is to convene in Springfield Monday to vote on two bills. One would roll back the levy on financial exchanges, including CME and CBOE Holdings, parent of the Chicago Board Options Exchange, provide tax credits for Sears, extend a research and development break and reinstate a net-operating-loss deduction. The other would provide relief to low- and moderate-income taxpayers. The package also includes $2 million in annual credits for theater companies in Chicago and a $3.5 million break for a downstate Illinois company, Champion Laboratories Inc.

The enticements are designed to halt interstate wooing of two iconic Chicago-area employers.

“In January, the Illinois General Assembly overreached and sent a message of anti-business signals,” said Doug Whitley, president and CEO of the Illinois Chamber of Commerce. “This is a positive message that says, ‘We hear you.’”

Critics argue the state is in no condition to drain revenue from its treasury. Its unfunded pension liability is $85 billion, and the retirement system has assets to pay only 45 percent of promised benefits, according to data compiled by Bloomberg. It is the lowest so-called funded ratio of any U.S. state.

Illinois Comptroller Judy Baar Topinka, a Republican, said Nov. 30 that spending reductions should be part of the package. “‘‘The ‘spend now, pay later’ culture of state government must change—and the time is now,’’ Topinka said in a prepared statement.

A report issued Nov. 28 by the Center for Tax and Budget Accountability, a not-for-profit think tank in Chicago, said it is the wrong time to provide tax breaks, given the deficit and the ‘‘profitability of the businesses’’ that would receive relief.

CME this year has underperformed the Standard & Poor’s 500 index by about 22 percentage points and the Bloomberg State Index of Illinois by about 20.

Chicago Mayor Rahm Emanuel in a Dec. 8 statement urged lawmakers to approve the bills and ‘‘keep the headquarters of two of Illinois’ most important companies here in Chicago.” Earlier in the day, Emanuel said Sara Lee Corp. would move its North American meat operation from suburban Downers Grove to Chicago.

Illinois’s financial challenges bring political risks for Democrats, who also control the governor’s office, Redfield said. After passing January’s tax increases with no Republican votes, they don’t want to be dogged by the question of “who lost Sears; who lost CME,” he said.

“They know the state is vulnerable and that Democrats are vulnerable,” Redfield said. “It’s difficult for the Legislature and the governor to say no, and businesses know they can leverage the situation.”

ADVERTISEMENT

  • Right On Brother
    I couldn't agree with you more. Fortunately for us, the folks in Illinois still don't understand how the world works and how wealth is created.It's called capitalism, and its not a dirty word.
  • huh?
    Evil right wingers! how dare they force the government to spend responsibly? those conservative people in Indiana need to be punished for being so responsible! I am moving to china where I can be free! or maybe Cuba for their excellent affordable healthcare!
  • This is what you get
    This trend started almost 30 years ago under right wing policies. Companies that were started and built on the backs of the workers who rather than give creedence to the joint effort decided to start extorting tax dollars in order for them to remain. I have watched this desimate cities across the midwest for the last thirty years by making unrealistic demands. And in actuallity this company doesnt even manufacture anything. This is absurd. I know Indiana is willing to bend over backwards to have them move here. I find it hard to believe that they will, Indy is no Chicago.
    • Is Indiana's Economic Sandbox Simply Better Than Illinois?
      The trouble with let's-make-a-deal tax policy is that it subsidizes clout — not economic potential. It's also inherently unfair and inefficient: The best tax system is one that has low rates, a broad base and clear, simple rules that don't distort economic decision making.

    Post a comment to this story

    COMMENTS POLICY
    We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
     
    You are legally responsible for what you post and your anonymity is not guaranteed.
     
    Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
     
    No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
     
    We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
     

    Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

    Sponsored by
    ADVERTISEMENT

    facebook - twitter on Facebook & Twitter

    Follow on TwitterFollow IBJ on Facebook:
    Follow on TwitterFollow IBJ's Tweets on these topics:
     
    Subscribe to IBJ
    1. Liberals do not understand that marriage is not about a law or a right ... it is a rite of religous faith. Liberals want "legal" recognition of their homosexual relationship ... which is OK by me ... but it will never be classified as a marriage because marriage is a relationship between a man and a woman. You can gain / obtain legal recognition / status ... but most people will not acknowledge that 2 people of the same sex are married. It's not really possible as long as marriage is defined as one man and one woman.

    2. That second phrase, "...nor make or enforce any law which shall abridge the privileges or immunitites of citizens..." is the one. If you can't understand that you lack a fundamental understanding of the Constitution and I can't help you. You're blind with prejudice.

    3. Why do you conservatives always go to the marrying father/daughter, man/animal thing? And why should I keep my sexuality to myself? I see straights kissy facing in public all the time.

    4. I just read the XIV Amendment ... I read where no State shall deprive any person of life, liberty, or property ... nor make or enforce any law which shall abridge the privileges or immunitites of citizens ... I didn't see anything in it regarding the re-definition of marriage.

    5. I worked for Community Health Network and the reason that senior leadership left is because they were not in agreement with the way the hospital was being ran, how employees were being treated, and most of all how the focus on patient care was nothing more than a poster to stand behind. Hiring these analyst to come out and tell people who have done the job for years that it is all being done wrong now...hint, hint, get rid of employees by calling it "restructuring" is a cheap and easy way out of taking ownership. Indiana is an "at-will" state, so there doesn't have to be a "reason" for dismissal of employment. I have seen former employees that went through this process lose their homes, cars, faith...it is very disturbing. The patient's as well have seen less than disireable care. It all comes full circle.

    ADVERTISEMENT