IBJNews

Illinois tax breaks could trigger demand for more

Back to TopCommentsE-mailPrintBookmark and Share

Under the threat of losing thousands of jobs to other states, Illinois officials are on the verge of approving a tax-relief package meant to keep Sears and the Chicago Mercantile Exchange from leaving. Now they face another question: Who's next?

As state senators sent the tax package to the governor's desk Tuesday, economic development experts said other companies are likely to threaten to move as well unless Illinois offers them more financial goodies. More than 100 companies, including Deere & Co. and Abbott Laboratories, have incentive packages expiring in the next three years — and may want better deals.

Businesses thinking of moving to Illinois could demand even bigger incentives or play Illinois against other states in a bidding war, experts said.

"Once it becomes known that you're giving incentives, other companies are going to ask for them. Why wouldn't they?" said Judith Stallmann, a professor at the University of Missouri-Columbia who has studied economic development.

The tax package includes $100 million in incentives for Sears Holdings Corp. and CME Group Inc., which runs the Chicago Mercantile Exchange and the Chicago Board of Trade. A smaller financial company, CBOE Holdings Inc., would also share in the tax relief.

CME Group Inc. talked to Indianapolis about moving its headquarters and about 1,700 high-playinbg jobs to central Indiana. Carmel also was likely a bidder for the company.

To help reduce anger over the aid for those companies, the package also includes roughly $120 million in more general tax breaks for all businesses and about $110 million in relief for poor and middle-class families.

The business measures passed the Illinois Senate 44-9. The cuts aimed at families passed 48-4. Illinois Gov. Pat Quinn supports the package.

Economic development experts said states often have little choice when major companies threaten to depart. Losing companies as prominent as Sears and the Chicago Mercantile Exchange, particularly without making a bid to keep them, can be a major blow to a state's business reputation.

"When you think of Illinois, you think of both of these companies," said Tim Monger, former executive director if the Indiana Department of Commerce and part of a real estate brokerage that works with companies on site selection.

Illinois officials, even ones who support the tax relief package, acknowledge that more businesses are likely to come forward with their hands out. They say the requests will have to be considered one by one, at least in the short term. Down the road, Republicans and Democrats are likely to battle over cutting income taxes — which were increased in January — or making other changes designed to improve the state's overall business climate.

A site-selection consultant in Park Ridge said he's already hearing from businesses that feel neglected and want state help.

"One of the unintended consequences of this whole thing is you are going to see a lot more midsize businesses feeling like they're getting screwed by the state," said Brent Pollina. "They're carrying the tax burden. The state doesn't care about them at all."

Experts say generous incentive packages aren't particularly effective in creating new jobs or retaining old ones.

A paper by Stallmann, from the University of Missouri, notes one study found that only 10 percent of new jobs that are attributed to economic incentives actually were created by the incentives. Another study found that companies often don't hire as many people as they promised when the state aid was handed out.

In the case of Illinois, CME Group isn't promising to keep its operations in the state even if receives the tax cut.

Sears CEO Lou D'Ambrosio said in an email to employees that when the bill is signed into law the company will "cease the review of alternative locations and remain in Illinois where we have been located for nearly 125 years."

If Sears moved its Hoffman Estates headquarters to another state, Illinois would lose about 6,000 jobs. To prevent that, the tax legislation renews a credit the company has been getting for years, guaranteeing Sears a $15 million break on its taxes for the next decade.

Losing the CME's operations could cost Illinois about 2,000 jobs. Lawmakers agreed to cut taxes for the hugely profitable company by changing how much of its business is subject to state income taxes, reflecting the fact that many of its transactions now take place electronically and don't involve buyers or sellers in Illinois. Now CME and CBOE will pay taxes on 27.54 percent of their revenue, not 100 percent, saving them about $85 million a year.

Opponents of the tax package said Illinois should help all businesses by reversing the income tax increase passed by Democrats in January.

"Once again we're picking winners and losers," said Sen. Kyle McCarter, R-Lebanon. "These special deals are bad public policy. Essentially, if you can't hire a big-time lobbyist with connections, you don't get any of your money back from the tax increase."

ADVERTISEMENT

  • Only The Little People Pay Taxes
    Report: 68 Fortune 500 Corporations Paying No State Income Tax

    The Institute on Taxation and Economic Policy and Citizens for Tax Justice study, "Corporate Tax Dodging in the Fifty States", lists 68 Fortune 500 companies that managed to pay no state income tax at all in at least one year during the period from 2008 through 2010 despite posting a total of nearly $117 billion in pre-tax U.S. profits during those no-tax years.

    http://dirtdiggersdigest.org/archives/2645

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. With Pence running the ship good luck with a new government building on the site. He does everything on the cheap except unnecessary roads line a new beltway( like we need that). Things like state of the art office buildings and light rail will never be seen as an asset to these types. They don't get that these are the things that help a city prosper.

  2. Does the $100,000,000,000 include salaries for members of Congress?

  3. "But that doesn't change how the piece plays to most of the people who will see it." If it stands out so little during the day as you seem to suggest maybe most of the people who actually see it will be those present when it is dark enough to experience its full effects.

  4. That's the mentality of most retail marketers. In this case Leo was asked to build the brand. HHG then had a bad sales quarter and rather than stay the course, now want to go back to the schlock that Zimmerman provides (at a considerable cut in price.) And while HHG salesmen are, by far, the pushiest salesmen I have ever experienced, I believe they are NOT paid on commission. But that doesn't mean they aren't trained to be aggressive.

  5. The reason HHG's sales team hits you from the moment you walk through the door is the same reason car salesmen do the same thing: Commission. HHG's folks are paid by commission they and need to hit sales targets or get cut, while BB does not. The sales figures are aggressive, so turnover rate is high. Electronics are the largest commission earners along with non-needed warranties, service plans etc, known in the industry as 'cheese'. The wholesale base price is listed on the cryptic price tag in the string of numbers near the bar code. Know how to decipher it and you get things at cost, with little to no commission to the sales persons. Whether or not this is fair, is more of a moral question than a financial one.

ADVERTISEMENT