Gov. Pat Quinn signed into law Friday legislation that makes Illinois disclose the terms of most of its major corporate tax breaks on a state Web site.
But the law only makes the Economic Development for a Growing Economy, or EDGE, tax credit program more transparent. It does not reform a somewhat convoluted tax credit program one watchdog assailed as “corporate blackmail.”
Greg LeRoy, executive director of the Washington, D.C.-based Good Jobs First, sees EDGE, Illinois’ main tax credit program, as corporate blackmail because it is explicitly for companies threatening to leave.
The Illinois Department of Commerce and Economic Opportunity, DCEO, says right on its Web site that, “The EDGE program is designed to offer a special tax incentive to encourage companies to locate or expand operations in Illinois when there is active consideration of a competing location in another state.” DCEO states the business “must provide documentation” it is being courted by another state.
A Chicago Tribune investigation last November found that 177 companies participate in EDGE, but it is not known how many companies successfully apply for the tax credit each year, and how much tax revenue EDGE costs the state.
Under EDGE, a company – such as participants Motorola and Sears – work out a deal with the state where they will get reductions from their corporate income tax for each state job the company adds, or in some cases, retains.
Indeed, the Tribune reported that the program, which has been around since 1999, increasingly is about job retention, not creation. So a company will tell the governor and state legislature that it will do massive layoffs unless they get the tax break.
Sometimes, as in the case of Hoffman Estates-based Sears last year, the company does massive layoffs anyway, but, apparently, the terms of their tax break prevented even more severe downsizing.
The new DCEO Web site is supposed to reveal what these terms are, which the state’s corporate accountability Web site does not do. However, State Rep. Jack Franks (D-Woodstock), who wrote the law, acknowledges that it will only pertain to future agreements: Past deals are grandfathered out for now.
Franks wants bigger reforms to tax breaks, and the assemblyman was not exactly in a celebratory mood about his bill becoming law. “I don’t think Quinn was too excited about it,” the lawmaker said in a phone interview. “He signed it at 4 p.m. on a Friday.”
Franks says he will “keep beating the drum” for legislation that will allow the General Assembly to review existing tax deals. The original version of his bill did that, but the provision died in the legislative process.
A review of the EDGE tax credit program raises the larger question of why recession-wracked states are locked in a zero-sum game with each other to placate businesses. Back in 1976, Business Week declared a “Second War Between the States” over luring businesses.
But the trend has not fully bloomed until now, which LeRoy of Good Jobs First, posits may be precisely because of the recession since state governments see tax breaks as a way to generate good economic news.
“A lot of public officials are very anxious to look good on the economy ... so they are more prone to overspending [on tax breaks].”