[Southsider2k12]

http://www.nwitimes.com/news/state-and-reg...8c9f205f93.html

INDIANAPOLIS | Gov. Mitch Daniels thinks Illinois' proposed 75 percent hike in its corporate and personal income tax rates will be great -- for Indiana.

In an exclusive interview Friday with The Times, the Republican governor said he looks forward to welcoming to the Hoosier State any Illinois business or resident that wants to pay less in taxes.

"We already had an edge on Illinois in terms of the cost of doing business, and this is going to make it significantly wider," Daniels said.

Illinois lawmakers are poised to vote next week on a plan that will raise the state's personal income tax rate to 5.25 percent from 3 percent, hike the corporate income and personal property replacement tax rates to a combined 10.9 percent and add an extra tax of $1 per pack of cigarettes. The income tax hikes would be retroactive to Jan. 1 and be reduced after four years.

Hoosiers pay a 3.4 personal income tax rate, while Indiana's corporate income tax rate is 8.5 percent.

The Tax Foundation, a nonpartisan tax research group in Washington, noted if the proposed corporate tax hike becomes law, Illinois businesses will pay the highest combined national-local corporate tax rate in the industrialized world.

That is the wrong course for Illinois to take, Daniels said.

"Folks in Illinois will eventually have to decide: Is this working well enough for us or do we want something different?" he said. "Point one of our anti-recession strategy here is to avoid doing what they've now decided to do."

Daniels has enacted deep budget cuts and eliminated many government programs to keep Indiana's budget balanced without a tax hike during his six years in office.

The money raised by the Illinois tax increases will help the state pay some $8.5 billion in overdue bills and make a $3.7 billion payment owed to government worker pension funds. Schools also would receive additional funding while property taxpayers would get a small annual rebate.

Despite the tax increase, Daniels said he's pleased to see Illinois finally may start paying its bills.

"That's just borrowing by a different name. They've been borrowing from the poor businesses that are suckers enough to do business with the state," he said.

Daniels also said he's surprised that two states as geographically and historically similar as Indiana and Illinois could be in such dissimilar financial shape.

"It does show that you can make very different choices, and the contrast between the choice we've made and the one they have is stark," he said. "Obviously I think ours is wiser, but self-governance means people get what they vote for."

[Southsider2k12]

http://news.yahoo.com/s/ap/20110113/ap_on_...ng_for_business

Neighboring states gleeful over Ill. tax increase

By CHRISTOPHER WILLS, Associated Press Christopher Wills, Associated Press – Thu Jan 13, 8:42 am ET

SPRINGFIELD, Ill. – While many states consider boosting their economies with tax cuts, Illinois officials are betting on the opposite tactic: dramatically raising taxes to resolve a budget crisis that threatened to cripple state government.

Neighboring states gleefully plotted Wednesday to take advantage of what they consider a major economic blunder and lure business away from Illinois.

"It's like living next door to `The Simpsons' — you know, the dysfunctional family down the block," Indiana Gov. Mitch Daniels said in an interview on Chicago's WLS-AM.

But economic experts scoffed at images of highways packed with moving vans as businesses leave Illinois. Income taxes are just one piece of the puzzle when businesses decide where to locate or expand, they said, and states should be cooperating instead trying to poach jobs from one another.

"The idea of competing on state tax rates is . . . hopelessly out of date," said Ed Morrison, economic policy advisor at the Purdue Center for Regional Development. "It demonstrates that political leadership is really out of step with what the global competitive realities are."

By going where no other state dares to tread, Illinois could prove itself to be a policy pacesetter or the opposite — a place so dysfunctional that officials created a jaw-dropping budget crisis and then tried to fix it by knee-capping the economy.

Illinois faced a budget deficit of $15 billion in the coming year, equivalent to more than half the state's general fund. Officials warned that state government might not be able to pay its employees. It certainly would fall further behind in paying the businesses, charities and schools that provide services on the state's behalf.

To avoid that, the Democrat-controlled General Assembly voted to temporarily raise personal income taxes 66 percent, from 3 percent to 5 percent. Corporate rates will rise, too — from 4.8 percent to 7 percent — when Democratic Gov. Pat Quinn signs the measure.

The increase is expected to produce $6.8 billion a year for the four years it's in full effect. That should be enough to balance Illinois' annual budget and begin chipping away at a backlog of roughly $8 billion in old bills.

The tax move inspired a day of taunts across state borders and finger-pointing between parties.

"Years ago Wisconsin had a tourism advertising campaign targeted to Illinois with the motto, `Escape to Wisconsin,'" Wisconsin Gov. Scott Walker said in a statement. "Today we renew that call to Illinois businesses, `Escape to Wisconsin.' You are welcome here."

Illinois state Sen. Dan Duffy, a Republican, labeled the tax increase "the nuclear bomb of jobs bills."

There was even some carping from Illinois Democrats. Chicago Mayor Richard Daley predicted jobs will start trickling out of Illinois with little fanfare.

"Businesses don't have press conferences like this and announce they're moving 50 people out, 60 people out, 70 people," Daley said at an event in Chicago.

But Illinois' governor rejected the idea that the increase would allow other states to lure jobs away. "Lots of luck to them, but that's not going to happen," Quinn said at a news conference Wednesday.

Businesses look at more than taxes when making financial decisions, Quinn said. They also look at whether state government is stable and able to provide good roads and schools.

"It's important for their state government not to be a fiscal basket case," Quinn said.

A Wisconsin company seemed to prove his point.

Train-maker Talgo Inc. is threatening to leave Milwaukee because Wisconsin rejected federal funds for high-speed rail. Talgo still considers Illinois a strong possibility for its new the company's new home, despite the tax increase, said spokeswoman Nora Friend.

The tax increase "would not weigh in as a positive, but it's difficult to say whether it's the deciding factor," Friend said. "It would be one more factor that gets weighed in."

Illinois Democrats note that even after the increase takes effect, the 5 percent personal income tax rate will still be lower than many nearby states'.

The top personal rate in Wisconsin is 7.75 percent, for example, and Iowa's is 8.98 percent. Indiana and Michigan will have lower rates, however — 3.4 percent and 4.35 percent.

Bill Ecton, 54, owns Ecton's True Value Hardware in Robinson, Ill., just a few miles from the Indiana border. He was resigned to the fact that Illinois ultimately would raise taxes to repair the budget, but he said the taxes will take a toll.

"If I have to pay more to the state, it's money that I can't pay out in wages," Ecton said. "I'm not saying I'm laying people off, but maybe I'm going to look twice at adding another one."

___

Associated Press writers David Mercer in Champaign, Ill., Scott Bauer in Madison, Wis., Dinesh Ramde in Milwaukee and Charles Wilson in Indianapolis, Ind., contributed to this report.

[MichiganCityDDS]

"""The idea of competing on state tax rates is . . . hopelessly out of date," said Ed Morrison, economic policy advisor at the Purdue Center for Regional Development. "It demonstrates that political leadership is really out of step with what the global competitive realities are."""

If he thinks the pols are out of step, I wonder what he thinks about the public which is so easily swayed on this topic?

[Southsider2k12]

This should be blood in the water for Economic Development team... Are they listening?

http://www.nwitimes.com/news/state-and-reg...html?mode=story

CHAMPAIGN, Ill. | When Sears Holdings Corp. rattled Illinois last month by saying it was considering moving its headquarters out of state, Gov. Pat Quinn promised he would find a way to keep the retailer around.

It's a potentially costly scenario that could be repeated more than 100 times over the next three years.

Tax-break deals with 107 companies will expire in 2012, 2013 and 2014, according to records obtained by The Associated Press through a Freedom of Information request. Those deals, worth more than $100 million, run out at a time when other states view Illinois as a prime target for poaching after this year's tax increases stirred unhappiness in the state's business community.

Illinois may have little choice but to offer bigger breaks to many of those companies or risk seeing them leave, even though the state already faces a budget deficit that could top $9 billion annually in coming years.

Dozens of the deals are with companies that employ hundreds or even thousands of people in the state, including J.P. Morgan Chase, Deere & Company, U.S. Cellular Corporation, Abbott Laboratories and Wells Fargo.

"If you get household name corporations appearing in news headlines (for leaving the state), that's not a good thing," Doug Whitley, president of the Illinois Chamber of Commerce, said referring to Sears' threat and more recent news that both the Chicago Board Options Exchange and CME Group were considering leaving Illinois.

"When a company raises its hands and says 'Look at me,'" Whitley added, "then you've got a government entity scrambling."

A state spokeswoman said there is no set way for the Department of Commerce and Economic Opportunity to handle expiring tax incentive contracts. But she said the end of a deal isn't a guarantee of a new one.

"This is not an automatic ticket for a company to get additional incentives," Marcelyn Love said in an email. "Our focus is on being responsive to companies so we can better assess their needs and make Illinois an attractive place to do business. If a company decides that they will be making additional investments and are interested in getting state assistance, then we would work with them."

Tax breaks and the way states use them to compete with each other, particularly those offered to retain existing jobs, are often criticized. Many economists say they don't creating anything new, but instead pay companies to maintain the status quo. But critics also tend to say they understand why states use incentives: few politicians would be able to stay in office if they refused to make deals to keep jobs that appear headed elsewhere.

The tax-break deals set to expire in Illinois in the next few years were made through the state's Economic Development for a Growing Economy program, known as EDGE. It is Illinois' primary tool to persuade companies with offers to leave the state to stay. The program also gives incentives to firms considering adding jobs to create them in Illinois.

Early last month, using the EDGE program, Illinois promised Motorola Mobility $100 million in tax breaks to keep the consumer electronics maker's headquarters in Libertyville.

The companies that made deals that expire between 2012 and 2014 promised to keep more than 12,000 jobs in Illinois and create another more than 10,000 positions. In some cases, according to state records, those companies haven't used the tax credits. Whitley and others said the most likely reasons are that the company didn't add jobs as intended, or the company didn't have profits to use the tax credit against.

Deals that expire next year include $34.7 million in tax breaks that J.P. Morgan Chase used after agreeing to keep 2,247 jobs at locations in Chicago, Elgin and Elk Grove Village, and $6.72 million in breaks provided to the Robert Bosch Tool Corp. after that company agreed not to move 444 jobs from a facility in Mount Prospect.

Deere & Company has used $7.28 million in tax credits as part of a deal expiring in 2013 that requires the company to keep 350 jobs in place and create 30 more at facilities in Moline, East Moline and Silvis.

In 2014, a deal with audio electronic maker Shure Inc. is set to expire. The company has cashed in $7.28 million in tax credits after agreeing to keep its headquarters and 570 jobs in state, in Niles, rather than look elsewhere. Also that year, a state deal with Abbot Laboratories to keep 260 jobs in Des Plaines and create another 50 expires.

Incentives are almost never the most important factor in where a company locates, experts say, only an important sweetener. But Illinois' situation makes them potentially more important. Businesses are genuinely unhappy about the state's tax increase and workers' compensation costs that are higher than in many states, said Tim Monger, senior vice president at Cassidy Turley, an Indianapolis law firm that helps companies negotiate incentives.

And companies almost certainly will at least look to see if they have better options elsewhere, Monger said.

"The closer you get to that end of that commitment, the question always is do we do it here or do we do it in another location," he said.

Neighboring states, sensing an opportunity in Illinois, have launched campaigns to lure businesses away. Indiana Gov. Mitch Daniels and Wisconsin Gov. Scott Walker repeatedly tout their state's business climates, and New Jersey Gov. Chris Christie flew to Illinois in February to meet with business leaders.

Sears employs 6,200 people in the Chicago suburb of Hoffman Estates. When the company said it was considering options elsewhere, Quinn quickly said Illinois would work on a deal to keep Sears in place.

"I'm sure that we will work out something that will work for the company, but most importantly, work for the common good, for the workers, for the jobs," Quinn said.

Instead of waiting for companies to make threats, the chamber's Whitley said, Illinois should be working its way down the list of companies with expiring deals and initiating the conversation. He doubts that's happening.

"That's a proactive approach that takes time and energy and effort; inertia is most likely to be the case," he said. "Furthermore, the state does not have a lot of resources to devote to this."