WYSO

In Ill., Higher Corporate Taxes Threaten Big Business

Jul 13, 2011
Originally published on July 13, 2011 7:51 pm

Illinois lawmakers are re-examining the state's business tax climate, just six months after raising the corporate income tax rate. The move comes as some corporate giants threaten to move out of Illinois. Some wonder how far the state should go to keep them.

Doug Whitley, president and CEO of the Illinois Chamber of Commerce, says his members aren't happy with the state's approach toward businesses.

"Big-name, household-name companies that are long-standing Illinois businesses have begun to rattle the cage and say, you know, this isn't the best environment," he says.

Construction equipment manufacturer Caterpillar was among the first corporate giants to complain in January, when Illinois raised the corporate income tax rate from 4.8 percent to 7 percent.

The latest complaint comes from an iconic company along the Chicago River: CME Group, the parent of the Chicago Mercantile Exchange and Chicago Board of Trade.

CME Group Chairman Terry Duffy spoke to NBC about moving the company's headquarters out of Illinois.

"All our transactions are taxed in Illinois. Whether they're coming from Mumbai or some other part of the world, they're being taxed here in Illinois. That's absolutely unjust," he said.

Retail giant Sears is also making noise about leaving, as the tax incentives that kept the company in Illinois almost 25 years ago are set to expire.

Illinois' Democratic governor, Pat Quinn, says he'll do whatever it takes to keep Sears and CME Group. That could mean more incentives, similar to those that recently kept Motorola Mobility and Navistar in the state.

Some suggest the big-name companies are just posturing to get larger tax breaks, a strategy some smaller employers complain they can't use.

"There are 372,000 companies operating in Illinois. We cannot afford to give hundred-million-dollar deals to all those companies; it's inefficient and impractical. What we really need to do is talk about creating a level playing field environment that makes Illinois a magnet," Whitley says.

He says he is encouraged that Illinois' legislative leaders are now creating a joint committee to review Illinois' business tax structure.

Though he would like to roll back the corporate tax rate, doing so would throw off the state's budget, State Senate President John Cullerton says. "We still need the $800 million the corporate income tax is bringing in. We need that because we need to have a balanced budget," he says.

Cullerton says that means all of Illinois' loopholes, exemptions and tax credits will also come under review.

"If we can get that money in some other way, in a fairer way, where it's more evenly distributed among the corporations, we're all in favor of that. From what I understand, from the Department of Revenue, about two-thirds of the corporations in Illinois don't pay any tax," he says.

Economists say businesses look at much more than taxes when deciding where to locate. They consider such things as markets, transportation infrastructure, the quality of life, available workforce. On those scores, Cullerton and other Illinois officials say the state is hard to beat.

Outplacement consultant John Challenger, of the Chicago-based firm Challenger, Gray & Christmas, says Illinois needs to address its business tax structure, because in this economy, competition is real.

"The competition's getting stiffer because everybody's fighting for jobs, every city wants to have a vital economy and so they're outcompeting, trying to woo companies," he says.

Challenger says the big three that threatened to leave — Caterpillar, Sears and CME Group — have a combined workforce of 30,000 people in Illinois. Losing any one of them, he says, could have a substantial impact on the state's economy.

Copyright 2018 NPR. To see more, visit http://www.npr.org/.

ROBERT SIEGEL, host:

From NPR News, this ALL THINGS CONSIDERED. I'm Robert Siegel.

MICHELE NORRIS, host:

And I'm Michele Norris.

Six months ago, Illinois raised its corporate income tax rate. And already, lawmakers there are re-examining that decision. Some corporate giants have threatened to move out of the state.

And as NPR's Davis Schaper reports, some companies are asking how far Illinois will go to try to keep them.

(Soundbite of vehicles)

DAVID SCHAPER: I'm standing on a bridge over the Chicago River, right downtown Chicago. And up and down this river, you can see some of the biggest corporate headquarters in the country.

Mr. DOUG WHITLEY (President/CEO, Illinois Chamber of Commerce): Well, from where we're standing, we're looking at Boeing. We're looking at CME. We're looking at Willis Tower. We're looking at Miller-Coors...

SCHAPER: Doug Whitley is president and CEO of the Illinois Chamber of Commerce. And he says many of his marquis members aren't happy with Illinois' business climate these days.

Mr. WHITLEY: Big name, household name companies that are long-standing Illinois businesses have begun to rattle the cage and say, you know, this isn't the best environment.

SCHAPER: Big equipment maker Caterpillar was among the first corporate giants to complain in January, when Illinois raised the corporate income tax rate from 4.8 percent to seven percent, at the same it raised the personal income taxes, too.

The latest to complain is one of those iconic companies along the Chicago River, the CME Group, parent of the Chicago Mercantile Exchange and Chicago Board of Trade. CME Group Chairman Terry Duffy told CNBC why he's considering moving the company's headquarters out of Illinois.

Mr. TERRY DUFFY (Chairman, CME Group): All of our transactions are taxed in Illinois, whether they're coming from Mumbai or some other part of the world, they're being taxed here in Illinois. That is absolutely unjust.

SCHAPER: And retail giant Sears is also making noise about leaving. The tax breaks and incentives that kept Sears in Illinois almost 25 years ago are set to expire.

Illinois' Democratic Governor Pat Quinn says he'll do whatever it takes to keep Sears and CME here, possibly meaning more incentives similar to those that recently kept Motorola Mobility and Navistar in the state.

Some suggest the big name companies are just posturing to get bigger tax breaks. And even the Illinois Chamber's Doug Whitley says while such tax incentives do have their place...

Mr. WHITLEY: There are 372,000 companies operating in Illinois. We cannot afford to give hundred million dollar deals to all those companies - it's inefficient and impractical. What we really need to do is talk about creating a level playing field environment that makes Illinois a magnet.

SCHAPER: Whitley says he's encouraged that Illinois' legislative leaders are now creating a joint committee to review Illinois' business tax structure. State Senate President John Cullerton, a Democrat, says he'd love to be able to roll back the corporate tax rate, but...

State Senator JOHN CULLERTON (Democrat, Senate President): We still need the $800 million that the corporate income tax is bringing in. We need that because we need to have a balanced budget.

SCHAPER: So Cullerton says that means all of Illinois' loopholes, exemptions, and tax breaks and credits will come under review, too.

St. Sen. CULLERTON: If we can that money in is some other way, in a fairer way, where it's more evenly distributed among the corporations, we're all in favor of that. From what I understand, from the Department of Revenue, about two-thirds of the corporations in Illinois don't pay any tax.

SCHAPER: Economists say businesses look at much more than taxes when deciding where to locate, including markets, transportation, infrastructure, the quality of life and available workforce. And on those scores, Cullerton and other Illinois officials say the state is hard to beat.

And Chicago's mayor, Rahm Emanuel, is stepping up efforts to make the city more business friendly; shaking up the board of World Business Chicago, the city's non-profit economic development arm that tries to attract and keep businesses in Chicago.

Outplacement consultant John Challenger, of the Chicago-based firm Challenger, Gray and Christmas, says all of these steps are needed because in this economy, the competition to lure corporations is real.

Mr. JOHN CHALLENGER (CEO, Challenger, Gray and Christmas, Inc.): The competition is getting stiffer because everybody's fighting for jobs; every city wants to have a vital economy. And so, they're out competing, trying to woo companies.

SCHAPER: Challenger says the big three that have threatened to leave Illinois -Caterpillar, Sears and CME Group - combined, employ 30,000 people in Illinois. Losing any one of them, he says, could have a substantial impact on the state's economy.

David Schaper, NPR News. Transcript provided by NPR, Copyright NPR.