Dear Fellow Retirees,
“There is an article in today’s Chicago Tribune Business
section that you should read. It concerns the State’s EDGE (Economic
Development for a Growing Economy) program. It has had and continues to have an
impact on our pensions.
“In the past I’ve been writing in general about the
State’s dire financial situation, and occasionally about the State’s EDGE
program. In short, EDGE is intended to bring jobs to Illinois or to encourage
companies to retain jobs in our state. The State will lower a corporation’s taxes
if it participates in EDGE. The State had good intentions, but
corporations quickly found many ways to abuse the program.
“For example, Ford is allowed to retain the state income
taxes paid by its employees. That’s right, monies that the state desperately
needs to maintain roads and to contribute to TRS is diverted to Ford’s bottom
line. Why would Illinois allow such a gross abuse?
“The reason is simple: the state unemployment rate was/is
high, and other states were/are offering similar programs. Corporations became
very adept at playing the states against one another. Archer Daniels
Midland, the gigantic agricultural products corporation was particularly avid.
The point is that the state’s ability to contribute to TRS is imperiled by
these give-aways.”
—Al Popowits
December 21, 2014
A Commentary about
the Archer Daniels Midland Corporation and EDGE credits by Al Popowits
“Would it surprise you to know that you pay more in state income tax than does Archer Daniels Midland Corporation? This is true despite the fact that (1) according to the State Constitution, the corporate income tax rate is 9.5%, and (2) ADM had sales last year of about $90B.
“How is it possible that a world-wide conglomerate can pay less state income tax than you? It is really quite simple. ADM accountants have used perfectly legal accounting methods to give the corporation a zero tax liability for years. Therefore, if you have paid any Illinois State income tax, you have paid more than ADM.
“This situation, however, has created a problem for ADM which has applied for an EDGE credit. EDGE is the acronym for “Economic Development for a Growing Economy.” It is a state program created to attract and retain businesses which make investments in jobs and capital.
“However, ADM does not qualify for an EDGE credit because without any taxes owed, ADM has no way to access the credit which would be worth about $1.2M a year for 20 years.
“How can ADM extract itself from this dilemma? It seems that the only thing it can do is follow the lead of Sears Holding, Motorola Mobile, Ford and other large corporations and take a tax credit against the income taxes paid not by the corporations, but rather by their employees. In other words, monies that were destined to pay for state pensions, roads, schools, state police, etc. would go to ADM’s bottom line. This will only be possible if the state legislature passes special legislation.
“Why would the Illinois state legislature even contemplate making such a deal? ADM is moving its corporate headquarters from Decatur, Illinois to somewhere else. That somewhere else could be Chicago or an out-of-state location. Corporate executives aren’t saying where they will relocate, but they have applied for an EDGE credit.
“The implication is that the legislature will either give ADM the EDGE or else! Some impolite readers might call this corporate black mail, but those folks just don’t understand these things. After all, they are only taxpayers.”
“Would it surprise you to know that you pay more in state income tax than does Archer Daniels Midland Corporation? This is true despite the fact that (1) according to the State Constitution, the corporate income tax rate is 9.5%, and (2) ADM had sales last year of about $90B.
“How is it possible that a world-wide conglomerate can pay less state income tax than you? It is really quite simple. ADM accountants have used perfectly legal accounting methods to give the corporation a zero tax liability for years. Therefore, if you have paid any Illinois State income tax, you have paid more than ADM.
“This situation, however, has created a problem for ADM which has applied for an EDGE credit. EDGE is the acronym for “Economic Development for a Growing Economy.” It is a state program created to attract and retain businesses which make investments in jobs and capital.
“However, ADM does not qualify for an EDGE credit because without any taxes owed, ADM has no way to access the credit which would be worth about $1.2M a year for 20 years.
“How can ADM extract itself from this dilemma? It seems that the only thing it can do is follow the lead of Sears Holding, Motorola Mobile, Ford and other large corporations and take a tax credit against the income taxes paid not by the corporations, but rather by their employees. In other words, monies that were destined to pay for state pensions, roads, schools, state police, etc. would go to ADM’s bottom line. This will only be possible if the state legislature passes special legislation.
“Why would the Illinois state legislature even contemplate making such a deal? ADM is moving its corporate headquarters from Decatur, Illinois to somewhere else. That somewhere else could be Chicago or an out-of-state location. Corporate executives aren’t saying where they will relocate, but they have applied for an EDGE credit.
“The implication is that the legislature will either give ADM the EDGE or else! Some impolite readers might call this corporate black mail, but those folks just don’t understand these things. After all, they are only taxpayers.”
—Al Popowits
October 8, 2013
Will the state ever want a take back on these corporate promises as it is doing to our pensions due to financial need? Not a chance.
ReplyDeleteFrom Richard Palzer:
ReplyDelete“If Madigan's position hasn't changed, what, if any, revamping of the program is in the works? In my opinion, corporate blackmail it is--the threat of leaving IL for other states willing to offer the same kind of incentives. Even people who might not object to corporations moving for lower tax obligations to improve their bottom line could well--hopefully--be upset by companies keeping and using (confiscating?) their employees' taxes in order to qualify for such breaks. Sounds to me like something else that needs to be more exposed, more than in the Business sections, which I presume isn't widely read. But people are quite aware that IL is in deep financial trouble, know that it needs $$$ big time, and question where additional money could come from, along with where it shouldn't go.”