Ralph Martire is the executive director of the Center for Tax and Budget Accountablility which is a bipartisan nonprofit research group that studies budget and fiscal matters. Mr. Martire also writes a monthly column for the Springfield Journal Register.
This month's column dealt with how government spends money. There are 2 ways, first directly on services(roads, education, medical, prisons, human services, etc.) but the other way is indirectly by enacting tax breaks/cuts.
I think all of us understand the first category at least a bit, although some skew it to just spending on poor lazy people who just won't get a job(of course they are the only ones that use the roads, education, medical, IEMA, Commerce Agency....yes, I'm being snarky). But the second category is a bit wonkier....now, we, as normal people, do receives some tax cuts, dependent and property tax "cuts" could be considered "tax expenditures", but this category are giving to businesses to allegedly "help fund a public good", you know-economic development. Such as jobs.
OK, the first category, direct expenditures, are given direct funds from the budget...hence the term, "direct expenditures"(OK, duh), but indirect or tax expenditures, Illinois doesn't collect anything, they allow businesses to keep the profits they would pay in taxes(or a percentage) and expect the business to provide a public good...you know, jobs and such. Now, don't get me wrong, this is a very "noble" aspect and a good partnership, if neither partner tries to screw the other...HELLO Google, Sears, CME! I'm talking about you!
Once corporate tax cuts(rarely are these given to the mom and pop small business groups--cities and counties can give local tax cuts) are made law...the cuts are not inspected to see if they are being used as intended...you know, more jobs rather than...oh...junkets to Costa Rica. Corporations don't have to come back on a yearly basis, begging for their tax cut, unlike schools, social service agencies--they must make their argument annually for their share of the budget...and these same services also compete with each other for what's in the pot...sort of like the reality shows like Survivor or Fear Factor(among others), each agency has to prove their more worthy than the next for a budget that keeps shrinking...strongest man left standing.
This month's column dealt with how government spends money. There are 2 ways, first directly on services(roads, education, medical, prisons, human services, etc.) but the other way is indirectly by enacting tax breaks/cuts.
I think all of us understand the first category at least a bit, although some skew it to just spending on poor lazy people who just won't get a job(of course they are the only ones that use the roads, education, medical, IEMA, Commerce Agency....yes, I'm being snarky). But the second category is a bit wonkier....now, we, as normal people, do receives some tax cuts, dependent and property tax "cuts" could be considered "tax expenditures", but this category are giving to businesses to allegedly "help fund a public good", you know-economic development. Such as jobs.
OK, the first category, direct expenditures, are given direct funds from the budget...hence the term, "direct expenditures"(OK, duh), but indirect or tax expenditures, Illinois doesn't collect anything, they allow businesses to keep the profits they would pay in taxes(or a percentage) and expect the business to provide a public good...you know, jobs and such. Now, don't get me wrong, this is a very "noble" aspect and a good partnership, if neither partner tries to screw the other...HELLO Google, Sears, CME! I'm talking about you!
Once corporate tax cuts(rarely are these given to the mom and pop small business groups--cities and counties can give local tax cuts) are made law...the cuts are not inspected to see if they are being used as intended...you know, more jobs rather than...oh...junkets to Costa Rica. Corporations don't have to come back on a yearly basis, begging for their tax cut, unlike schools, social service agencies--they must make their argument annually for their share of the budget...and these same services also compete with each other for what's in the pot...sort of like the reality shows like Survivor or Fear Factor(among others), each agency has to prove their more worthy than the next for a budget that keeps shrinking...strongest man left standing.
Now, its understandable that during times of sluggish economy, services might have to fight to be King of the Hill, but why only those? Why not corporate tax cuts? As I noted, both Google and Sears are still receiving the tax cuts even tho they lied about how they were going to help Illinois! Everyone needs to pay their fair share.
SB1159/HB390, the Close Corporate Tax Loopholes bills were written during this session to close/investigate changes within a couple of our worst loopholes in Illinois. Forcing service providers to slug it out for funding during difficult fiscal times may be unavoidable, but why only direct expenditures? Why not big corporations having to also be scrutinized? Tax expenditures should also be scrutinized. Even Gov. Quinn endorses it as well as having bi-partisan supporters.
The first loophole that was identified in this bill is the Foreign Dividend Exemption. Corporations in Illinois don't have to pay any taxes on dividends made in foreign lands, only on profits in the United States...could we make it any easier for companies to move much of their profits into dummy corporations in, oh, I don't know, Viet Nam????? How about the job outsourcing? No taxes paid for that call center in India? Cool, lets screw the Illinois citizens. This is an annual loss of $300 million.
The second loophole is almost as bad as the first. The Domestic Activities Production Deduction which is guided by federal law that states that businesses may deduct 9% of their income if they are producing anywhere in the United States. So, what does Illinois do? We have the same freakin' wording, so that if an Illinois company moves its business to say, Alabama, it get to keep the deduction from the Illinois business instead of only making it about Illinois. Yes, this does encourage businesses within the US, but why not just make it for Illinois? Instead of encouraging businesses to grow in other states? The cost of this idiotic law? $100 million annually.
The second loophole is almost as bad as the first. The Domestic Activities Production Deduction which is guided by federal law that states that businesses may deduct 9% of their income if they are producing anywhere in the United States. So, what does Illinois do? We have the same freakin' wording, so that if an Illinois company moves its business to say, Alabama, it get to keep the deduction from the Illinois business instead of only making it about Illinois. Yes, this does encourage businesses within the US, but why not just make it for Illinois? Instead of encouraging businesses to grow in other states? The cost of this idiotic law? $100 million annually.
And last, the non combination rule. This rule exempts all financial, insurance and transportation businesses from reporting all profits. So, if I'm in charge of a big corporation that has a transportation subsidiary...how long do you think it'd take me to figure out, move most, if not all, of my profits to that business and not pay taxes? Maybe an hour if I'm a bit dull, I'd say. This costs us about $25 million--not as large as the other 2, but I'd pick it up in a flash, wouldn't you?
And as we know in these times of corporate greed and lobbyists, this bill wasn't even called for a vote.
But there a couple more that I'd like to see changed and I've complained about them in the past:
The Retailer's Discount on Sales Taxes and Accelerated Depreciation.
Accelerated depreciation is very easy to understand. Some businesses get to depreciate equipment (computers, cars, JETS) at a faster rate than other businesses--doesn't sound very fair to me.
The Retailers Discount goes sorta like this---I go to a store, buy $100 worth of clothing and pay the 6.25% state sales tax. The retailer then sends the $6.25 to the state at the end of the quarter/year, right? Nope. This tax cut allows the retailer to keep some of the sales tax. It was established years ago when it was more difficult to figure out the taxes in a small window of time. My idea? To the State legislature...ummm, we have computers now, this problem is alleviated! Get rid of this giveaway NOW! This costs the state between $4-5 Billion annually! We wouldn't have a so-called pension problem if we changed this law to only include small local businesses. Walmart walks out with an extra $9 million a year---you mean to tell me you think Walmart, the one that pays its employees so little that over 80% receive medicaid and food stamps...and we give them another $9 Million of our tax money?????
Yes, its time for some changes in Illinois, but that means everyone should pay their fair share, not just Mr. and Ms. John Q Public...Caterpillar its time to get your lazy ass off of corporate welfare and get to work!
And as we know in these times of corporate greed and lobbyists, this bill wasn't even called for a vote.
But there a couple more that I'd like to see changed and I've complained about them in the past:
The Retailer's Discount on Sales Taxes and Accelerated Depreciation.
Accelerated depreciation is very easy to understand. Some businesses get to depreciate equipment (computers, cars, JETS) at a faster rate than other businesses--doesn't sound very fair to me.
The Retailers Discount goes sorta like this---I go to a store, buy $100 worth of clothing and pay the 6.25% state sales tax. The retailer then sends the $6.25 to the state at the end of the quarter/year, right? Nope. This tax cut allows the retailer to keep some of the sales tax. It was established years ago when it was more difficult to figure out the taxes in a small window of time. My idea? To the State legislature...ummm, we have computers now, this problem is alleviated! Get rid of this giveaway NOW! This costs the state between $4-5 Billion annually! We wouldn't have a so-called pension problem if we changed this law to only include small local businesses. Walmart walks out with an extra $9 million a year---you mean to tell me you think Walmart, the one that pays its employees so little that over 80% receive medicaid and food stamps...and we give them another $9 Million of our tax money?????
Yes, its time for some changes in Illinois, but that means everyone should pay their fair share, not just Mr. and Ms. John Q Public...Caterpillar its time to get your lazy ass off of corporate welfare and get to work!
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