Crain’s Chicago Business Opinion: Illinois creates more budget stress with poorly structured corporate tax breaks
Good Jobs First Executive Director writes in Crain’s Chicago Business:
When it comes to tax breaks meant to create jobs, Illinois can’t get it right.
Administrations Republican and Democratic spend way too much on too few companies. They spend too little on public systems that make a place “sticky” for promising employers. They fail to watch the “candy store” to ensure results. Then they struggle with structural budget deficits.
For four decades, the state has granted huge incentive “megadeals” to individual companies, like the two it gave Sears totaling about $1 billion in today’s dollars — and we all know how that worked out. It radically changed how it taxes corporate profits, at the behest of big manufacturers, only to see the state lose hundreds of thousands more factory jobs.
Illinois deregulated its tax increment financing (TIF) program so that schools districts and local governments now lose about $2.3 billion a year to TIF districts. It allowed a costly program, Economic Development in a Growing Economy, or EDGE, to fail mandated reporting for 20 years — and then extended it. It has three major programs that allow corporations to keep their employees’ state personal income tax payments — terrible tax policy.
Illinois and localities have given Amazon.com at least $732 million for 17 warehouses — even though the company had to build them for rapid delivery (and of course e-commerce simply grows at the expense of store-based retailers, like Sears).
The state enacted virtually automatic tax breaks for new data centers that routinely employ just 20 or 30 people each but are now costing the state more than $370 million a year. That program’s cost alone rose 628% last year.
When five huge federal stimulus bills sent the state $54 billion for myriad covid-recovery purposes, Illinois was prone to using the one-time money to plug ongoing obligations — next to worst among the 11 biggest states, said a prominent budget think tank.
By one official tally, Illinois spends $17 in foregone tax revenue for every $1 it appropriates for jobs. That dated ratio is far higher now because of Gov. Jay Pritzker’s $1.5+ billion in recent commitments on electric vehicles, quantum computing and microchips.
Spending through the tax code means less legislative oversight, less control over spending, and far less public awareness.
Read the rest of the article (subscription required) at Crain’s Chicago Business.
Read our recent report, “Revenue Icebergs Ahead for Illinois: Corporate Tax Breaks Versus Sound Budgets.”
