CHICAGO – Lawmakers on Friday questioned the effectiveness of the tax breaks Illinois gives companies to keep or create jobs, with one legislator saying there’s little verifiable evidence the incentives work and another calling the current system “insanity.”
Illinois businesses benefited from about $1.15 billion in tax incentives in fiscal 2012, according to an analysis by the bipartisan Commission on Government Forecasting and Accountability. Yet lawmakers noted the state continues to have one of the highest unemployment rates in the country.
Only three states – Nevada, Rhode Island and Michigan – had unemployment rates higher than Illinois’ 8.7 percent as of November.
“We have to remember every incentive we give comes at the expense of taxpayers,” said Rep. Jack Franks, a Democrat from Marengo and chairman of one of the two legislative committees that held the joint hearing.
But the reviews weren’t all bad. Adam Pollet, director of the Illinois Department of Commerce and Economic Opportunity, said companies that received the state’s main business tax credit have created 2½ times the number of jobs they pledged to create. And Connie Beard of the Illinois Chamber of Commerce said the incentive – known as the Economic Development for a Growing Economy, or EDGE, tax credit – has been “a very valuable tool” for bringing and keeping business in the state.
The issue has grown more divisive in recent years, as corporations ranging from Sears to the Chicago Mercantile Exchange and Archer Daniels Midland Corp. have sought multimillion-dollar breaks.
After lawmakers ended a special legislative session last year without approving a deal for ADM, influential House Speaker Michael Madigan criticized the requests, saying he found it difficult to support “tax giveaways” for companies that pay little to no corporate income tax. The Chicago Democrat also said he wanted the Legislature to review how Illinois decides which companies get the incentives.
Franks and Rep. John Bradley, a Democrat from Marion, said Friday’s hearing was the first in a series of meetings on the topic. They said the discussions could lead to legislation during the General Assembly’s spring session that would change how the state awards the incentives.
The EDGE program provides a credit against corporate income taxes, provided companies make certain capital investments, create a minimum number of jobs and attest another state is trying to lure the business from Illinois. But many companies that qualify for the credit are unable to use it because they do not pay any or enough corporate income tax.
According to the Commission on Government Forecasting and Accountability report, about 30 percent of Illinois corporations paid corporate income tax in 2010. So some of those companies that pay no income tax have instead gone to the Legislature and asked lawmakers to approve other, special tax breaks, typically against their payroll withholding tax.
State Rep. David McSweeney, a Republican from Barrington Hills, said the current program sets up a system in which lawmakers pick winners and losers. He said Illinois should lower tax rates instead.
“The insanity of special deals for companies and sitting here and trying to choose winners and losers has got to stop,” he said.