Illinois Loves Its Sweethearts

by Kristen De Pena | February 14, 2012

Love is in the air, but not just for romantic couples. In Illinois, Governor Quinn and the Illinois General Assembly love giving tax breaks to keep big business in Illinois.

In a two-bill package, Sears received a $300 million annual tax relief package designed to keep the company from leaving Illinois. Less than two weeks after Illinois lawmakers signed off on the package, Sears released a list of the Sears and Kmart locations set to close due to poor holiday sales. Following a conversation between the Sears CEO and Governor Quinn, presumably about the tax package, no Illinois locations will close.

In addition, the package restructured the taxes paid by the Chicago Mercantile Exchange to reflect positive changes in the trading business for the company. The package is also designed to give about $3.5 million in tax relief to Champion Laboratories, a southeastern Illinois Company.

Despite frustrations voiced by critics over the gushing love for Illinois corporations, Governor Quinn staunchly defended the tax breaks, saying that to refer to the packages as "sweetheart deals" is unfair. Instead, Quinn alleges that the tax incentives will help to keep and grow jobs in Illinois for both large and small businesses alike. And for Illinoisans, the package raises the state's $2,000 personal exemption on state income taxes, upping it by $50 per person and increases the state's earned-income tax credit paid by low-income workers.

Yet amidst Governor Quinn's emphatic support of the package, many concerned with the fiscal solvency of the state voice concerns over the impact of the bill on Illinois. In fact, in a balanced budget note offered by the Illinois Office of Management and Budget in SB 0397, the Committee found that the bill would have a negative fiscal impact of $40 million in fiscal year 2012; a negative fiscal impact of $263 million in fiscal year 2013; and a negative fiscal impact of $325 in fiscal year 2014.  

Negative fiscal outlooks are hardly new for Illinois. Less than one week ago, Illinois Speaker Michael Madigan outlined grim budget news to House Democrats concerning the fiscal year set to begin in July. Even if revenue grows between 2-4 percent, a $568 million to $1.13 billion gain, the new money will hardly dent the increasing cost of public worker pensions, expected to reach $957 million, on top of Illinois' $28,843,970 outstanding debt.

Although Governor Quinn signed on to the sweetheart deals, he refuses to return to pre-2011-tax-hike rates, saying "[w]e have to pay the bills and we're going to continue to do that, [and] we must also make investments [...] in education [...]." In his 2012 State of the State, however, Quinn does not mention the budget shortfall that includes $8.5 billion in unpaid bills. The backload of bills is expected to quadruple from $9.2 billion to $34.8 billion over the next five years. Quinn also remained mum about owing Quincy's Early Childhood Center $650,000, putting the education center in danger of closing.

To pay the bills, Quinn signed legislation in 2011 increasing the personal state income tax by 67 percent, from 3 percent to 5 percent. The corporate income tax rate rose to 7 percent, from 4.8 percent. Additionally, toll rates increased, effective January 1, 2012, nearly doubling tolls from 40 cents to 75 cents in an effort to fund a $12.1 billion expansion and improvement project for Illinois roads. When the tax increases were signed, the Illinois unemployment rate was 9%. Over the course of last year, the rate steadily grew to 9.8% by December 2011, well above the 8.5% national average.

To appease growing frustration over the sweetheart deals in the face of the struggling Illinois economy, Quinn proposed new tax cuts in his February State of the State address, including college or post-secondary training certificates by 2025, and a tax credit for families with children to boost post-secondary education; that credit will save a family of four about $100 a year. And despite Illinois' growing unsustainable debt and floundering economy, Quinn indicated that the state could expect additional budget expansions, to "build and grow [the] economy."

For sure, Sears and CME will continue to love Illinois lawmakers, especially Governor Quinn. Whether Illinoisans, however, consider a break-up with the Governor if he continues to shower only big business with fiscal roses and candy remains to be seen.

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