Plan to tax 'loopholes' the wrong way to go

Corporate tax hikes are not the way to solve Illinois' budget problems. The state should instead be looking for ways to improve its business climate.

There's no end in sight for Illinois' massive backlog of unpaid bills, now at roughly $9 billion and growing. Gov. Pat Quinn's proposed budget, which he unveiled last week, attempts to whittle away at the backlog by roughly $2 billion by June 2014 through increased tax revenues and spending cuts.

He also proposed suspending several of what he called corporate loopholes that he estimated would raise about $450 million annually and would be put into a special fund only to be used to pay bills that are past due.

Paying the state's overdue bills is both a moral and a financial imperative, and we understand the impulse to look at every possible source of revenue, but we think that raising taxes on corporations in Illinois would be exactly the wrong thing to do at a time when the state should be trying to improve its business climate to promote jobs and raise revenue.

"Suspending corporate loopholes like these until the bills are paid will be good for our vendors and good for our economy," Quinn said in his budget address. "Why should we give costly, ineffective loopholes to some of the biggest and most profitable corporations on Earth when we have bills to pay?"

Yet it was just last year that he signed legislation approving $100 million in tax incentives for Sears and the Chicago Mercantile Exchange and the Board of Trade to prevent them from leaving the state. He says those tax breaks were different because they saved thousands of jobs, but his current proposal would raise taxes on job creators. And then there's the question of how temporary the tax-break suspension would be, given the magnitude of the bill backlog.

Quinn's plan would allow Illinois to tax foreign profits paid as dividends to U.S. parent companies of multinational corporations, eliminate a link between the state tax code and a federal law that allows tax deductions for "production activities" that Illinois-based companies move to other states, and require companies that have companion businesses to file a combined tax return, even if the companion is in the finance, insurance, or transportation fields, which currently fall under the "non-combination" rule.

Quinn called on legislators to send him a bill in the next 12 weeks, but his proposal got a chilly reception in the Legislature and a hostile reaction from business leaders, who say it would hurt job creation and that parts of it would be unconstitutional.

Todd Maisch, vice president for government affairs for the Illinois Chamber of Commerce, said Quinn's plan "is just one more way in which Illinois is the leader of the pack of doing things that employers will shake their heads and say, 'When are these guys going to figure it out, that you've got to help us and not continually have an agenda that whacks us on the head?'"

In the end, there is no magic pot of money that will help bail the state out of its financial problems. It took years of financial mismanagement to get into this mess, and it will take years of hard decisions and sacrifice to get out of it. But no small part of the task is to grow the state's economy to provide jobs for taxpayers and revenues from corporate taxes. Measures such as the one Quinn proposed will only make things worse.

Sections (2):Editorials, Opinion
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Sid Saltfork wrote on March 14, 2013 at 6:03 pm

Cut the retired public employees pensions in order to maintain the "ink and paper" tax loophole for newspapers?

SaintClarence27 wrote on March 15, 2013 at 10:03 am

I wish I could "like" comments.