Tuesday, December 13, 2011

Quinn to get legislation giving tax breaks to companies

By Jamey Dunn

Two companies threatening to leave the state will likely stick around if Gov. Pat Quinn signs tax breaks the Illinois Senate approved today, but some lawmakers say it isn’t worth the price tag.

The Senate passed two bills today that contain a plan similar to one piece of legislation that the chamber approved two weeks ago. That bill only received eight “yes” votes in the House. “The bill was separated into two pieces to allow folks who feel pretty strongly on one or the other bill to vote their consciences,” said Sen. Toi Hutchinson, sponsor of the package.

Senate Bill 400 offers tax breaks for individuals in the form of increasing the Earned Income Tax Credit from 5 percent of the federal credit to 10 percent over two years and linking the standard exemption to federal cost of living increases. SB 397 has tax breaks for Sears and the CME Group, which owns the Chicago Mercantile Exchange and the Chicago Board of Trade. Sears and the CME group both threatened to leave the state in recent months. A previously approved tax credit for Sears was set to expire. The CME Group argued that it was being taxed unfairly because its income tax bill, which is based on profits made from sales, counted all sales as taking place in Illinois, but the company makes many of its sales online to customers outside of the state. Under the plan that passed today, 27.54 percent of the company's electronic sales would be used to calculate its Illinois tax bill. The package also includes tax changes meant to help businesses throughout the state, such as an extension of a research and development credit and reinstatement of a net operating loss credit. The plan is projected to cost about $300 million next fiscal year and $350 million by fiscal year 2014.

“We are in the position right now where — yes, it’s unfortunate — there are businesses that are coming and holding us over the barrel, and I understand that that leaves a bad taste in a lot of legislators' mouths,” Hutchinson said during floor debate. But Hutchinson, an Olympia Fields Democrat, said the state cannot afford to lose the jobs those companies provide. “Every one of those people who are working live here. They pay sales taxes. They pay income taxes. … We are in a serious situation right now. We did the best we could with the negotiations we had. This is a bill that you can go home and defend.”

Opponents said that the state cannot afford the plan. Many argued that giving tax breaks to companies that threaten to leave favors big business with the means to lobby the legislature and opens the door for a rush of companies threatening to leave unless the state gives them something as well. “These special deals are bad public policy,” said Sen. Kyle McCarter, a Lebanon Republican. “This is a great bill for lobbyists, in fact maybe we can rename this bill the lobbyist dream act. Because every business in this state will and probably should line up to get their money back, and they are going to need a lobbyist.

Gov. Pat Quinn, who supports the plan, said that competing with other sates and offering tax incentives to encourage businesses to remain in the Illinois is part of the current economic climate. “Every state in the union has on the books tax incentive measures that have been passed by their legislatures to try and get jobs from other states, other businesses from other states. We just have to understand that that’s what the reality is.”

Sears has indicated that if Quinn signs the plan, it will stop shopping around for a potential move. James Parasi, chief financial officer for CME, told a House committee Monday that the passage of the plan into law would keep the CME Group in the state for years to come.

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