Boohoo for those 'suffering' corporations which pay no taxes

Boohoo for those 'suffering' corporations

Chicago Tribune
John McCarron
January 23, 2011

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So moved am I by the plight of Illinois corporations, what with the big state income tax increase, that I'm asking you, dear readers, to keep sending those letters of outrage to your legislators and to your favorite newspaper.

To provide you with a little background, allow me to back up and recount the many, many horribles visited upon our corporations over the last half century.

It all started, I think, after World War II, when taxpayers paid for an interstate highway system for the purposes of national defense and summer vacations. Turned out the biggest impact fell upon companies that previously had been shackled to aging central cities tied to rails and rivers.

Why pay ever-higher local taxes to keep those crumbling cities afloat, our business brethren reasoned, now that semitrailers can operate from anywhere in the metro … or better yet, down South where they'd be rid of the labor unions?

So began the Great Jobs Exodus, a corporate trail of tears in which uprooted families of organization men left ancestral city neighborhoods such as Austin and Marquette Park for uncertain suburban lives in places like Schaumburg (Motorola) and Glenview (Kraft).

Oh, the pain of it. But fortunately for these refugees our state's place-based laws governing sales and property taxes enabled them to provide for themselves the very best schools and municipal services. What happened back in Chicago was, well, someone else's problem.

Sometime during the early '70s this trickle became a flood after tax lawyers discovered the new suburbs and Sun Belt cities could be induced to bid against one another to attract footloose corporations, or better yet, tax-gushing shopping malls and big-box discounters. In the big push to stay "competitive," states and towns dug deep to give companies free land and infrastructure, tax abatements of all kinds, even millions to train new workers to replace those left behind in the cities.

But corporate hardship did not go away, so in 1987 the Illinois Legislature began reforming the way our state taxes corporate income. Previously the formula took into account a firm's overall sales, number of employees and value of property — the better to offset the burden a company placed on public schools, roads and the rest. Now the tax on profits is based solely on that portion earned from sales within Illinois. This reform and others worked so well that one study by the state's Office of Management and Budget found that 48 percent of Illinois corporations with annual sales of more than $50 million paid zero state income tax from 1997 to 2005. Relief at last!

Yet still they suffered. Try as they might to slash labor costs by moving production to Mexican maquiladoras and beyond, our majors struggled to compete with the cheap imports that flooded in following passage of business-backed trade treaties such as the North American Free Trade Agreement and the General Agreement on Tariffs and Trade.

Corporations lobbied for "free" trade hoping to gain access to vast emerging markets in the developing world … only to discover governments there are less taken with the manifold benefits of free men and free markets. Several of them, especially China, have pinko national industrial policies — a concept long discredited here in the states — that make it all but impossible to export into their markets unless our companies take on local "partners," share technology, and ultimately, agree to make stuff there, not here.

So long-suffering businesses leaders have been busy signing deals with Chinese companies, including many that didn't exist a few years ago.

It was hoped these new partnerships — along with their God-given right to keep profits overseas so they can't be taxed in the U.S. — would finally bring relief. But no! Along comes the Illinois General Assembly — a lowdown bunch of scoundrels, I gather, from reading newspaper editorials and letters to the editor — to raise the corporate rate to 7 percent from 4.8. The outrage!

We can only hope Illinois corporations that still pay income tax aren't forced out of business, or to Wisconsin, or to open a mail drop in the Cayman Islands — like so many of the Fortune 500 have been forced to do — where we'll have to send our checks for haircuts and pizzas.

So keep those outraged letters to the editor coming. You could even send a small contribution to the Illinois Chamber of Commerce so it can keep up the fight.
Your gift might not be tax deductible for you … but I'm sure it will be for them.

John McCarron teaches, consults and writes on urban affairs.
http://www.chicagotribune.com/news/opinion/ct-oped-0124-mccarron-20110123,0,94251.story