PI Original Steven Ross Johnson Thursday December 15th, 2011, 2:32pm

Corporate Tax Dodge Report Reveals Millions Lost In Illinois

As Illinois lawmakers this week passed a $371 million tax break package aimed at keeping Chicago’s financial exchanges and Sears from fleeing the state, a new study has helped to shed some light on the issue of corporate tax incentives, finding that a number of Illinois’ most profitable firms have paid little in state corporate income taxes in the past three years.

As Illinois lawmakers this week passed a $371 million tax break package aimed at keeping Chicago’s financial exchanges and Sears from fleeing the state, a new study has helped to shed some light on the issue of corporate tax incentives, finding that a number of Illinois’ most profitable firms have paid little in state corporate income taxes in the past three years.

A profile of more than 200 Fortune 500 companies conducted by the non-profit tax think tank, Institute on Taxation and Economic Policy, found two Illinois-based firms – Baxter International and Integrys Energy Group — paid no state corporate income taxes between 2008 and 2010 while reporting combined profits totaling more than $1.7 billion for the same period.

“Pretty clearly, a lot of the biggest and most profitable corporations doing business in Illinois and other states are finding ways to reduce their income state tax liability to zero or even below zero,” said Matthew Gardner, ITEP executive director and co-author of the study.

“In Illinois and in other states, there are at the same time many companies that are paying something close to what they ought to pay at 5, 6 or 7 percent of their income in state corporate taxes," he added. "So there is a real divergence between the companies that have been favored with company-specific tax breaks and those that have been left out in the cold.”

At issue, according to Gardner, has been the practice of state lawmakers over the years of targeting just a few specific companies for tax breaks, which he said has had a profound impact on other taxpayers, including small businesses and residents.

“It seems you’ve got this parade of companies going to the governor and the legislature saying, ‘if you don’t give us a tax break right now we’re going to leave,’” Gardner said. “It’s a real slippery slope and once you start down that slope, it’s hard to know when that ends.”

In fact, Baxter International was noted for having received a total of around $28 million in state income tax breaks, which came out to having an overall tax rate of -3.1 percent been the yeas of 2008 and 2010.

Also included in the study was Chicago employer Boeing, who paid a tax rate of 0.1 percent between 2008 and 2010 while reporting $9.7 billion in profits over that time.

In all, 13 of 16 corporations listed in the report paid less than the state corporate income tax rate of 4.8 percent during the period studied. In January, the Illinois legislature raised the corporate income tax rate to 7 percent, but House Republicans are seeking to lower it once again.

Gardner pointed out the findings of the report were based on what companies paid nationwide in state income tax and does not detail what they might have paid to a specific state.

“There’s no smoking pistol that says Illinois taxpayers have been short-changed,” Gardner added. “But it’s pretty clear that somebody is being short-changed, whether it’s the residents of Illinois or Wisconsin or California from the tax avoidance that’s being documented in this report.”

The overall impact, Gardner said, has been a loss of some $42 billion in state revenues between 2008 to 2010. Indeed, the report seems to highlight an ongoing trend over the past decade of declines in the amount of funds states have collected in corporate state income tax.

While Gardner acknowledged the political pressure put on lawmakers to boost their economies, he said corporate tax cuts were not an effective means of achieving that goal.

“There still is this inexorable math where if you cut a tax, it’s got to be paid for,” he said. “That could mean cutting education spending – that could mean cutting not building that bridge you were talking about building, it could mean hiking taxes on low- and middle- income families instead, which none of these are solutions that would make sense to people as a growth strategy.”

But others contend Illinois’s current corporate tax rate has become another hurdle companies have to overcome in order to thrive.

“I think our businesses right now are struggling with a very high corporate tax rate,” said Connie Beard, tax director for the Illinois Chamber of Commerce. “So tax benefits that bring the cost of doing business in Illinois benefits all business.”

Instead of tax breaks that target a few companies, Beard advocated reducing the overall state corporate income tax rate for all businesses in order to avoid threats of companies leaving in the future.

“We do support tax reform in Illinois, we think there’s a lot that can be done to make the Illinois tax structure more fair for all companies small and large so that we aren’t selecting one or two companies to get benefits — like we’ve seemed to have been doing recently,” Beard said. “We definitely would support legislation to reform the tax code.”

In terms of economics, Beard pointed to the large number of “secondary benefits” that went with attracting or even retaining businesses.

“I think it would be to the benefit of any locality to have a business locate within your area,” Beard said. “That means jobs — that means people moving there, purchasing there, eating there — there’s all sorts of secondary benefits, plus the property taxes and utility taxes that the local government would get that they would not have gotten without that company locating there.”

ITEP’s report, “Corporate Tax Dodging in Fifty States, 2008-2010” (PDF), profiled 265 Fortune 500 corporations that consistently earned profits between 2008 to 2010 and filed their total state taxes with the SEC.

Comments

See? The right of "PERSONHOOD" comes w/ the responsibility of "PERSONHOOD"!! If those greedy bastard large corporations expect the right to bribe elected officials w/ their bottomless pockets.... let the greedy bastards pay taxes at the same rate that I DO!!!
I am SOOOOOO tired of paying my taxes at a Single person's rate while large sycophant producing tax dodgers get by w/ little or NO taxes siphoned out of their obscene profits!!!

And are we to believe our elected officials can't seem to figure out how to get this state out of it's financial BLACK HOLE? Hellllllooooo!!!! Stop expecting the little guys to pay that bill Mr Governor! Start paying for your own lunches Mr Cullerton!! Pay for your own spa treatment Ms Radogno... (Wait... you obvioiusly havent' had one of those!!)
Try to grow a set and make Illinois the first state that that finally stands up for the average JOE and says to the big boys... Pay up or GO!!!!

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