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Illinois House Panel Opens Hearings on Corporate Tax Incentives

January 17, 2014

In the wake of several recent high profile corporate incentives requests, the Illinois House Revenue and Finance Committee just held what promises to be the first of a series of hearings geared toward reforming corporate tax policies. Led by Representatives John Bradley and Jack Franks, the committee embarked upon a fact-finding mission to understand current Illinois tax policies, how they are being implemented, and the practices used in other states, particularly those who are Illinois’ main competitors for economic growth. According to Representative Franks, the purpose of the mission  is to “engage in a data driven discussion” with the goal of “establishing a competitive tax policy that creates jobs in Illinois.”

Representative Franks opened the hearing with harsh criticism of the State’s current corporate incentives policy. Referencing the State’s Economic Development for a Growing Economy, or EDGE, program, which is the State’s main economic incentive tool, Representative Franks used phrases such as “capital cronyism” and “corporate hostage holding.”  He went on to describe EDGE as a “program turned on its head” with “no tangible or verifiable benefits.” Further, he noted, the bar has been set too high for small businesses, the main economic drivers, to take advantage of programs like EDGE. There were also consistent references to a lack of transparency and information about the EDGE program. In sum, Franks said that “the current system cannot continue” particularly since every EDGE dollar spent on companies “has a direct effect on Illinois taxpayers.”

While EDGE was the lead topic of discussion, testimony was solicited on other programs such as enterprise zones, film credits and sales tax exemptions. Much of the testimony focused on efficacy of these programs and their role in Illinois’ competitive position in retaining and attracting business. One point that was emphasized in this context was that the discussion could not just center on State taxes. It was also necessary to look at local taxes when trying to establish tax policies that promoted growth.

The Committee had solicited witness limited testimony from a wide variety of stakeholders. Witnesses included representatives of small business advocacy groups, the director of the Department of Commerce and Economic Opportunity, economics academics from major universities, and representatives from business groups such as the Illinois Chamber of Commerce and Illinois Manufacturers Association. Many witnesses went home with “homework” from the Committee since Representatives Bradley and Franks strongly expressed a desire for facts and sources of data, rather than conjecture and conclusions. 

The takeaway from the hearing is that there is a strong desire to reform Illinois corporate incentives policy. The prevailing view is that current policies are not working and that change is needed. The Committee has a heavy burden of analyzing current practices and attempting to discern best practices from other jurisdictions. Results will not happen overnight, but this current legislative session promises to offer spirited debate about Illinois’ corporate tax incentive policies.

To keep up-to-date on the latest news regarding the Illinois corporate tax policy reform discussion, please contact the author of this alert, Andrew Scott, in our Chicago office at 312-627-8325.

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