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Olson: Get out of bed with tax-dodgers

Published: Friday, March 21, 2014 11:46 p.m. CDT • Updated: Monday, April 7, 2014 12:42 p.m. CDT

My wife, Kate, woke up in the middle of the night this week and decided to wake me up, too.

In the front room at our house, there’s a baby grand piano that she’s had since she was a girl. Not long after we bought our first “real house,” my father-in-law jumped at the chance to finally get it out of his house and into ours. I think he paid to have it shipped down from Wisconsin.

It’s followed us around ever since, a black lacquered monolith that gets its own room wherever we live. I don’t mind, really. Kate’s teaching the girls to play, and it looks sophisticated when we have company.

But now, it was waking Kate up, which in turn wakes me up. Thanks, piano.

“I think someone is hitting the piano keys,” she said, after nudging me awake.

Part of being a husband is learning to handle these middle-of-the-night episodes. The brain snaps out of deep slumber, listens closely to what it’s being told, and then comes up with a good reason for going back to sleep.

This one was actually easy. Most likely, she was dreaming. Another possibility was that a virtuoso intruder had broken into the house. Or maybe someone was setting a trap, lying in wait to attack me in the dark.

Regardless, unless someone was going Jerry Lee Lewis down there, I wasn’t going to be investigating. My reasoning was guided by my vested interest in continuing to lay there, dreaming of the day when I can play golf again.

This happens to people sometimes – our self-interest rules our reasoning.

It can be as simple as wanting to stay in bed. More often, there’s money on the line.

“Sham offices”: The Chicago-based Regional Transportation Authority said it is now suing two DeKalb County cities for lucrative deals they’ve struck with corporations to help them dodge sales taxes.

Sycamore is one of them. The city has cut deals with both United and American Airlines, two of the world’s largest air carriers, to set up fuel-buying operations in their town.

The contention is that those offices are where those two global operations make their fuel purchases for the more than 1,000 flights they run out of Chicago’s O’Hare Airport, which both use as a hub. With the purchases made here, the airlines pay a much lower sales tax rate than the 9.5 percent they would pay in Cook County, where they actually do business.

These two companies have more than 20,000 employees based in Chicago, but if they have any working in Sycamore, they’re hard to find. Whenever our reporters have visited these local offices during weekday work hours, there’s been no one there. In its lawsuits against the city and the airlines, the RTA calls them “sham offices.” It says that the real work is done in Cook County, and should be subject to tax there.

By maintaining these offices in Sycamore, the airlines save millions. In addition to the lower tax rate, the city rebates loads of money in sales taxes to the airlines every year. In 2012, Sycamore returned almost $18 million to United, while keeping about $400,000.

It might seem like everybody wins in the deal. Well, everyone except for Cook County taxpayers.

But the businesses running this game are the real winners. Local governments are selling themselves cheap.

Sycamore’s agreements with the airlines have been in place more than a decade. Sycamore has made more than $7 million since 2001, while RTA claims that this scheme and others like it have cost its agency alone about $100 million.

This week, Genoa became a target of the RTA’s legal crusade. RTA said it is suing over its 2005 deal with Elgin-based PetroLiance, a fuel and oil distributor formerly known as Boncosky Oil Co.

Genoa rebates only 50 percent of the sales-tax proceeds it receives from PetroLiance’s activity at its “order acceptance office” on Washington Street. It’s still a sweet deal for the company, which pays an initial sales tax rate of 6.25 percent rather than Kane County’s 8.25 percent, and then gets a good chunk of that back, too.

After the rebate, Genoa took in more than $130,000 for the one-year period that ended in November.

The company said three people work part-time at its Genoa office. But there’s no sign visible on the building, and when we visited about 2:30 p.m. Thursday, no one was there.

Pretty low key for an operation that transacted $50 million in business last year.

Officials in Sycamore and Genoa now are in the awkward position of defending something that would infuriate them if the roles were reversed. But it’s legal, they say.

That doesn’t make it right, or necessarily good for the area. Truth is, our communities aren’t really winning by picking up a few crumbs from businesses in Chicago and Elgin. By letting these companies have it both ways, we’re actually minimizing our area’s tax advantage.

Why bother?: If you run a business based in Cook County, and the sales tax is killing your bottom line, maybe you consider a move. But why go through the hassle of moving your operation – or even part of your operation – if instead you could just rent an office, maybe pay someone to show up once a week and send a fax, and save millions in sales tax?

That makes the choice too easy, and the net benefit of DeKalb County’s lower taxes is a few bucks for local government.  

Wouldn’t it be better if in order to pay that lower tax rate, a business actually had to move real jobs here, do real business, and contribute to the local economy?

Businesses have way less incentive to do that if we just give that tax benefit away for nothing.

If the companies want to do business in Chicago, let them pay what it costs to be part of that community. If they want to do business here, or even just do some of their business here, we’d love to have them. They’re clearly already aware that the cost of doing business here is lower.

The money local governments collect might give local leaders a vested interest in defending these deals, just like I have a vested interest in staying in bed when my wife is having weird dreams.

The key difference: It’s not worth being in bed with companies that are running this kind of game.

• Eric Olson is editor of the Daily Chronicle. Reach him at 815-756-4841 ext. 2257, email eolson@shawmedia.com, or follow him on Twitter @DC_Editor.

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