 The Illinois House Revenue and Finance Committee on Monday approved
the legislation, which is a trimmed-down version of an earlier plan
aimed at calming some of the state's biggest businesses, which are
upset over a corporate income tax rate hike of 47 percent this year.
The most sweeping changes are its costs -- estimates for the
previous plan pegged its yearly cost at upward of $800 million in
tax revenue -- and its funding source.
The tax breaks will be funded by letting a provision in the tax
code expire on Dec. 31. That provision allows a business to claim a
tax credit for the full depreciation of a capital investment, like
equipment, all at once instead of over the lifetime of the
investment.
That will give the state upward of $250 million more in tax
revenue annually, making the tax breaks a wash on paper, said state
Rep. John Bradley, D-Marrion, who is sponsoring the legislation in
the Illinois House.
The cost and funding source of the plan might have shifted over
the past several weeks, but the heart of the measure remains.
CME Group, which owns the Chicago Board of Trade and the Chicago
Mercantile Exchange, and national retail company Sears Corp. have
threatened to leave the state, if the Legislature doesn't make the
cost of doing business in the state cheaper, and this spawned the
original push to make tax changes before Dec. 31.
State Rep. Barbara Flynn Currie, D-Chicago, likened CME Group's
and Sears' threats to assault with a deadly weapon.
"We're here today because there are two companies in the state of
Illinois that are essentially holding a gun to our heads," Currie
said.
Under the current House proposal, CME Group still would see
annual tax savings of about $85 million, the single largest benefit
outlined in the package.
Sears would get a tax break of $15 million annually over the next
decade, as long as it keeps its headquarters and 4,250 employees in
Hoffman Estates. Sears employs about 6,100 people at its corporate
headquarters outside of Chicago.
CME Group alone was responsible for 6 percent of all the state's
corporate income tax before the tax moved from 4.8 percent to 7
percent last year. With the tax increase, CME Group will pay more
than $150 million this year in corporate income taxes.
Bradley and state Rep. David Harris, R-Arlington Heights, who
worked to hammer out the deal, said nothing prevents another large
business from threatening to leave if another state offers a better
tax deal.
"That is an ongoing issue that the (Illinois) Revenue and Finance
Committee is trying to tackle. We haven't come up with a good
solution for that yet. Part of the problem is that as long as other
states do the same thing, were going to continue to have a problem,"
Bradley said.
Small- and medium-sized businesses that can't afford to leave the
state will get some tax relief in the package, said Harris and
Bradley.
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Under the current plan, all businesses could claim up to $100,000
in a tax credit if expenses outstrip revenue during a tax year,
something known as net operating losses.
The previous plan would have reinstated the net operating tax
credits at a cost of $275 million annually.
The ability to claim net operating loss credits was suspended
temporarily at the same time the income tax was increased to help
the state deal with its troubled finances. Claiming net operating
losses of no more than $100,000 means a lot more to a mom-and-pop
business on Main Street than to a conglomeration worth millions of
dollars, Harris said.
Organizations that represent businesses of all stripes that
questioned the intention of the previous legislation now support its
current incarnation.
Both the Illinois Chamber of Commerce, the largest businesses
lobbying group in the state, and the Illinois Manufacturing
Association, which represents manufacturing businesses, testified
for the current plan Monday because of its tax breaks for small
businesses.
They were especially supportive of the move to extend a research
and development tax credit for another five years.
Beyond businesses, there's an attempt to offer some tax relief to
individuals, whose personal income taxes jumped by 66 percent in
January.
The state's earned-income tax credit for low- to moderate-income
families would go from 5 percent of federal earned-income tax credit
to 7.5 percent under the plan. That translates into a maximum tax
credit of $283 to $424.50.
This would cost the state about $55 million every year, said
Bradley.
The original measure tripled the state's earned-income tax credit
at a cost of $112 million, according to the Illinois Department of
Revenue.
Additionally, the standard tax deduction for individuals would go
from $2,000 to $2,050.
David Vaught, director of Gov. Pat Quinn's Office of Management
and Budget, said Quinn supports the spirit of the measure, but he
wants more tax relief for individual taxpayers before signing any
legislation.
[Illinois
Statehouse News; By ANDREW THOMASON]
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