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Tax-break expansion plan raises concerns, shrugs

Published: Sunday, May 18, 2014 11:55 p.m. CDT
Caption
(AP photo)
House Speaker Michael Madigan, D-Chicago, testifies during a May 14 committee hearing at the Capitol in Springfield. Madigan is pushing to give small companies in the state equal access to the tax breaks that big corporations have. The plan takes aim at special EDGE credits – tax breaks a small number of big companies like Sears Holding Corp. and OfficeMax have sought by going directly to the General Assembly with threats to leave Illinois. Madigan's plan would make the tax credits available to businesses with fewer than 100 employees, and target credits at areas of high poverty and unemployment.

CHAMPAIGN – Illinois House Speaker Michael Madigan is pushing to give small companies equal access to tax breaks that big corporations have, but the proposal has been met with skepticism in the state’s business community, including about what effect it actually would have.

The plan takes aim at special EDGE credits – tax breaks a small number of big companies like Sears Holding Corp. and OfficeMax have sought by going directly to the General Assembly with threats to leave the state. EDGE credits are the state’s primary means of luring or keeping companies and jobs, but they’re usually administered by the Department of Commerce and Economic Opportunity and include performance standards. Companies that have gone straight to the General Assembly want to cut their own deals with perks not available to other companies.

Madigan’s plan would make the tax credits available to businesses with fewer than 100 employees, and target credits at areas of high poverty and unemployment. But some small business owners say such credits might have little impact on their decisions, and executives are raising objections to a provision that would require them to reveal private information.

Experts say Madigan’s legislation is at least partially an exercise in election-year politics, by catering to a constituency friendlier to Democrats. Neither Madigan’s staff nor the state Department of Commerce and Economic Opportunity has estimated yet what the plan could cost.

– SPECIAL INCENTIVES:

The state’s attention turned to business tax breaks after a string of big companies tried, and sometimes succeeded, to cut their own deals with the General Assembly.

“It was quite a frenzy, which I think is where Madigan thought, ‘Wow, this could be a monthly occurrence,’” Madigan spokesman Steve Brown said.

The speaker’s legislation would try to make these one-off deals less appealing to businesses, in part by requiring that they make income and tax details public.

Illinois Chamber of Commerce President Doug Whitley said he’s OK with stopping companies from cutting special deals. But he said few if any would agree to public disclosure of tax information, which also would be a “red flag” to businesses already leery of Illinois.

“I think that Illinois continues to send the signal that we are not particularly business-friendly,” he said.

Whitley said it would be better to expand tax breaks to sales taxes, among others — a move that would reach more companies.

– SMALL BUSINESS:

A recurring complaint about Illinois’ tax breaks is that small businesses don’t have equal access.

Madigan’s plan would remove a current requirement for new capital investment of $1 million. A business with fewer than 100 employees would merely have to add at least five new jobs.

But regulation and workers’ compensation are far bigger issues to the 11,000 Illinois companies that are part of the National Federation of Independent Business, said Kim Maisch, the group’s state director.

“I don’t ever have anybody say, ‘Can you get me a $1,500 tax credit?’” she said, noting that almost all NFIB members in the state employ 50 or fewer people.

One of those members, however, says he’s willing to give the plan a look.

“Job creation is what it’s all about, and tax credits can help you do that,” said Todd Kaeb, who co-owns KSI Conveyors Inc. and Illinois Grain and Seed in Cissna Park, about 40 miles northeast of Champaign.

– HIGH-UNEMPLOYMENT AREAS:

Under Madigan’s proposal, deals would be contingent on creating new jobs in areas where 20 percent of residents live in poverty or where unemployment is more than 3 percentage points above the state rate.

The legislation would cap the size of credits available for retaining jobs, but raise the cap if the jobs are in those underprivileged areas.

“We want to spread the benefits of this across more areas of the state,” said David Roeder, a spokesman for DCEO, which is working with Madigan on his plan.

Kaeb, the small-business owner, expressed doubts, saying no business owner would expand based on tax breaks. The economics of a move or expansion would have to make sense on their own, he said.

– POLITICS:

The proposal comes in an election year when Democrats are trying to lure friendly voters to the polls. Madigan’s proposal is probably part of that, said Kent Redfield, a professor emeritus of political science at the University of Illinois-Springfield.

“The speaker’s caucus and Democrats in general tend to represent districts that fall more into” high unemployment and poverty areas, he said. Lawmakers “can take credit for being involved in DCEO, cutting ribbons and all of that.”

Madigan spokesman Brown didn’t quibble with the argument. “We also understand, frankly, that it’s an election year,” he said.

He said more legislation may be on the way related to business taxes and incentives, though declined to offer details.

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