Illinois Tax Loopholes - Aren't I Getting None?

Loopholes (aren’t I getting none?)

Noun:  (Dutch from liupen) Angular cuts of slits and openings in the stone walls of castles or fortifications which allowed an archer or soldier to look out and fire without being exposed directly to enemy attack.  Later uses have evolved connotations of gaps or omissions that can be manipulated or exploited.

While you and I were sleeping:

Trying to get legislators and the Governor in Illinois to recognize a structural revenue problem has not been an easy task; on the other hand, some illumination at the end of the political tunnel glimmered this week with the proposed amendment by Representative Naomi Jakobsson and Representative Linda Chapa LaVia (thank you both) for a graduated income tax (HJCR0002).  Don’t start buying party supplies yet, as one veteran Representative recently warned me;  “The specific nature of such a change in the nature of income tax – if it were to pass - is not yet anything more than nebulous.”  Foggy or not, the proposal momentarily lifted my spirits, but alas, then I forgot the nature of those who make law, at least in our State of Illinois.

Wake Up Call:

Acting with the lethality of a hit squad less than a month ago, the Revenue and Finance Committee of the House of Representatives of the General Assembly efficiently garroted SB282, a bill that might have helped correct some of the structural revenue deficit in Illinois.  SB282 was passed last November in the Senate and allowed for an actual and authentic accounting of how much Illinois receives or loses from its powerful businesses in their income taxes to our state.  It would have required companies to disclose in actual numbers (for the last two years) tax income received and taxable income that got away.  How would such disclosure help you?

The Recurrent Nightmare:

Every year, publicly traded businesses and corporations – like CME, Sears, Boeing, etc.  – arrive at the Governor’s mansion and ask for tax breaks.  When the Governor pauses, the company representatives turn less solicitous (think Jekyll and Hyde) and warn that their businesses will leave Illinois if they are not given their demands for a tax handout.  The Governor wrings his hands, and he turns to his fellow legislators in the General Assembly, and together they all perform a ritual dance not dissimilar to the Kubler-Ross stages of dying, but they later all give in.  Such is that last stage: resignation.  Later on, when they find out a company like Sears is closing its stores despite promises – or a company like Caterpillar is moving some of its operations to another state with “right to work” laws – they perform symbolic acts of hari-kari through bitter apologies and appearances of shock/dismay.  Note: all these are indeed only figurative.  No politician has ever been actually harmed by these symbolic acts of contrition.  In fact, Governor Quinn has become a stock character in this recurrent drama.

On the other hand, neither the Governor nor the General Assembly can tell truthfully whether or not a company like CME or Sears or Motorola is sincerely in need of tax relief or simply taking advantage of the money trough Illinois provides every year – a lucrative trough that is NOT open to the thousands upon thousands of mom-and-pop businesses that cannot use their size and Civic Committee influence to force a tax handout.  Without really knowing what these company ledgers look like, how much tax is collected or how much is lost, the legislature and the administration in Illinois cannot respond with any sense of true need or correctness.  Influence, weight, force, and threat become trump cards in such a climate.

By forcing publicly traded companies in Illinois to disclose their tax information (income, holdings, payroll, etc.) SB282 would have given the legislature, the Governor and the public a look at what large companies in Illinois have paid dearly to be kept secret – just how much they actually pay in income taxes and just how much they earn at the state level.  Take for example a company like Boeing.  According to the Institute on Taxation and Economic Policy, an bi-partisan group  that gleans through thousands of income and tax documents on the federal level to ascertain an estimate of what companies pay on the state level, Boeing pulled in a three-year profit of nearly $10 billion (2008-2010) but paid effectively no income taxes in at least one year; in fact, a minus 1.8% in tax rebates and income subsidies for all three years.  Like you and me, state taxes are determined by the federal form results, so Boeing in effect pays no taxes to Illinois in state tax as its mysterious collection of accountants can create ledgers that call for no taxes on the federal level ( http://www.ctj.org/corporatetaxdodgers/CorporateTaxDodgersReport.pdf ).  

Waking up:

What would be gained by having access to such information?  Simply this:  knowing what these many corporations were making and what they actually paid would make it a very different scenario when they (lobbyists) came to the Governor’s mansion to ask for and then demand tax relief.  There are many forms of loopholes, some specific to Illinois, which we can discuss later in other blogs.  But know this, without access to that information; the General Assembly is as blind as you or me in determining whether a company actually needs financial assistance in the form of a tax break. 

Conscious yet?

So why, one must ask one’s self would the House Revenue and Finance Committee kill off the proposed legislation?  Would it be because of the influence of people like the Illinois Chamber of Commerce CEO Doug Whitley, who announced, “If this becomes law, it is another outrageous example of Illinois political leaders demonstrating anti-business actions.  It is not rational to keep publicly flogging the job creators” ((http://www.chicagobusiness.com/article/20121127/BLOGS02/121129875/biz-blasts-bill-to-make-firms-open-their-books ).  

Other groups like the Taxpayers Federation in Illinois warn that this kind of inquiry can make the state “even less attractive” for job growth.  It’s a refrain, isn’t it?

If you’re wondering, like I was, what would possess the members of the House Committee on Revenue and Finance to bury the possibility of such disclosure, you might want to ask them.  I did.  So far, only Representative Barbara Flynn Currie has answered my request for information.  As she was a co-sponsor with Senator John Cullerton to pass SB282, she of course voted to move the bill to the floor.  The others have not told me why they did or did not move the bill forward.  Let me know what you find out.

Revenue and Finance Committee Members

John Bradley, Chair, 217-782-1051 / 618-997-9697

Michael J. Zalewski, Vice-Chair, 217-782-5280 / 708-442-6500
Arthur Turner, 217-782-8116 / 773-277-4700

David Harris, Republican Spokesperson, 217-782-3739 / 224-635-2010

Marcus C Evans, 217-782-8272 / 773-783-8492
Joe Sosnowski, 217-782-0548 / 815-547-3436

Barbara Flynn Currie, 217-782-8121 / 773-667-0550

Frank J. Mautino, 217-782-0140 / 815-664-2717

David McSweeney, 217-782-1517 / 847-516-0052

Ed Sullivan, 217-782-3696 / 847-566-5115

Remember, in order to correct tax loopholes, we all (legislators, too) need to know what’s going on.  Call for disclosure!  Thanks.