In 2010, Illinois ranked fifth nationally with a gross state product in excess of $644 billion. The International Monetary Fund ranks Illinois the 19th largest economy in the world, exceeding Switzerland, Poland, Belgium, Sweden, and Saudi Arabia, to name a few.

The question that must be asked is, “If Illinois is so rich, why can’t it pay its bills?” Full-page advertisements showing Abe Lincoln with his pockets turned inside out tell us that the state’s pensions are to blame. However, the financial press gives us another perspective: the Illinois state legislators are gifting huge sums of tax payers’ money to large corporations. In the last decade, the state has pledged at least $433.4 million in tax credits to 177 companies through the state’s corporate incentives program. The actual figure is probably much higher, but we can’t be certain because state law does not require the reporting of all corporate tax credits.

What are corporate tax credits? They are arcane accounting devices used by large businesses to lower their tax obligations, which are then passed on to small businesses and individual taxpayers. These business incentives are given to large corporations that promise not to move out of state, to retain their current work force, or to increase the number of jobs. However, many question the effectiveness of such “incentives.”

For example, Illinois manufacturers lobbied for and received a major restructuring of the tax code that went into effect fully in 2000. These changes cost the state an estimated $100 million a year. According to the Chicago Tribune, “Proponents had projected the change would spur 285,000 new manufacturing jobs. Instead, the sector’s employment shrank to 600,000, down from as many as 800,000 when the legislation took effect.” In 2007 a large auto manufacturing firm received a $28.5 million tax break; the company did not meet its job retention goals.

Currently a bill is being crafted in the state legislature to lower the tax obligations of the Chicago Mercantile Exchange and the Chicago Board of Trade which have threatened to leave Illinois. A broad range of tax breaks for other businesses are being piggybacked onto this bill. Barbara Flynn Currie (D-Chicago) thinks these credits could decrease state revenues by as much as $600 million. Agreements have already been brokered which allow firms to even keep the state income taxes paid by their employees. Taxes which would have been used to support public education, aid for the indigent and elderly, and many other state services are being siphoned off into corporate coffers.

One must ask, is it really the state pension funds which have caused the state’s financial distress or the misguided generosity of our state legislators?

Al Popowits
River Forest

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