In Zero Sum Game, Rick Perry Courts Illinois Businesses

Matthew Blake

Rick Perry's attempts to woo Illinois businesses, such as this ad in Crain's Chicago Business, could prompt Illinois to give corporations costly tax breaks.

Texas Gov. Rick Per­ry rode into Chica­go this week in an effort to las­so Illi­nois-based busi­ness­es and herd them to the Lone Star State.

At a press con­fer­ence on Mon­day, Chica­go May­or Rahm Emanuel met the vis­it with deri­sion. I hope when he comes he remem­bers all three of his rea­sons,” joked the may­or, ref­er­enc­ing Per­ry’s 2012 debate gaffe, in which the gov­er­nor could­n’t list the three gov­ern­ment depart­ments he was plan­ning to axe.

Indeed, the efforts by Per­ry, best known for his wild­ly unsuc­cess­ful 2012 pres­i­den­tial run, are easy to mock. An ad in Crain’s Chica­go Busi­ness bankrolled by Per­ry’s office por­trays Texas as an emer­gency exit door for Illi­nois busi­ness­es. An accom­pa­ny­ing let­ter from Per­ry solemn­ly warns Illi­nois com­pa­nies that your sit­u­a­tion is not unlike a burn­ing build­ing on the verge of collapse.”

The burn­ing build­ing is evi­dent­ly a metaphor for not only Illi­nois’ major bud­get deficit, but also the state’s above aver­age union­iza­tion rate, cor­po­rate income tax and fourth high­est hourly min­i­mum wage in the coun­try, at $8.25. In con­trast, Texas boasts the low­est pos­si­ble min­i­mum wage, $7.25, and ties with Mis­sis­sip­pi for the high­est pro­por­tion of work­ers earn­ing the minimum.

Illi­nois is used to the cor­po­rate raid­ing efforts of Repub­li­can gov­er­nors from less work­er-friend­ly states. If efforts to lure busi­ness­es across bor­ders con­sti­tute a Sec­ond War Between the States,” as Busi­ness Week announced back in 1976, the Prairie State is one of the biggest bat­tle­grounds. After Illi­nois passed tem­po­rary per­son­al and cor­po­rate income tax increas­es in 2011, Wis­con­sin Gov. Scott Walk­er penned a Chica­go Tri­bune op-ed urg­ing Illi­nois com­pa­nies to move north of the bor­der. Indi­ana Gov. Mitch Daniels also chimed in after the tax increase, com­par­ing Illi­nois to the dys­func­tion­al fam­i­ly down the block.”

Brooke Ander­son, spokes­woman for Illi­nois Gov. Pat Quinn, says the pub­lic­i­ty stunt” from Per­ry is the same old rodeo.”

Perry’s stunt, though, could have seri­ous con­se­quences for Illi­nois – in the form of juicy tax breaks down the road for Illi­nois corporations.

Busi­ness­es did not leave Illi­nois after the advances of Walk­er and Daniels, but Quinn and the Demo­c­ra­t­ic-con­trolled leg­is­la­ture spent hun­dreds of mil­lions of dol­lars just to be sure they stayed.

Indeed, accord­ing to a study released in Jan­u­ary by the Wash­ing­ton, D.C.-based insti­tute Good Jobs First, Illi­nois has some of the nation’s high­est relo­ca­tion sub­si­dies. These are indi­vid­ual cor­po­rate tax incen­tives that states use to lure com­pa­nies, but Illi­nois uses them not to attract new com­pa­nies, as Per­ry is try­ing to do, but to keep cur­rent ones.

For exam­ple, the state forked over $275 mil­lion to Sears Hold­ing Corp. in Decem­ber of 2011, because Sears made noise about mov­ing to a more favor­able tax envi­ron­ment. Then in Feb­ru­ary of 2012, Sears gave pink slips to 100 employ­ees at its head­quar­ters in Hoff­man Estates, lay­offs that did not the vio­late terms of the tax break.

Per­haps the most noto­ri­ous cor­po­rate hand­out by Illi­nois came when the state revised its tax code in 2011 in order to save lucra­tive finan­cial exchange CME Group, Inc. about $60 – 80 mil­lion each year in tax­es. Fol­low­ing the deal, advo­ca­cy group Stand Up! Chica­go cer­e­mo­ni­ous­ly placed a gold­en toi­let” in front of CME’s Chica­go headquarters.

In some instances, the mere threat of a com­pa­ny leav­ing is enough for a tax deal. The Illi­nois Eco­nom­ic Devel­op­ment for a Grow­ing Econ­o­myor EDGEtax cred­it pro­gram says that Illi­nois com­pa­nies may qual­i­fy for a tax break so long as there is active con­sid­er­a­tion” of mov­ing to anoth­er state and doc­u­men­ta­tion” that anoth­er state wants the company.

Illi­nois is a state that is cur­rent­ly being pirat­ed,” says Good Jobs First Exec­u­tive Direc­tor Greg LeRoy.

Texas, mean­while, spends more on busi­ness tax incen­tives than any state, as the New York Times report­ed on last Decem­ber, even as its per-pupil edu­ca­tion spend­ing is abnor­mal­ly low and its pover­ty rate is extra­or­di­nar­i­ly high.

In 2003, Per­ry cre­at­ed the Texas Enter­prise Fund, essen­tial­ly a pot of mon­ey the gov­er­nor uses to attract new com­pa­nies. Whether the fund has brought eco­nom­ic rewards is unclear: Per­ry has claimed 54,000 new jobs linked to approx­i­mate­ly $410 mil­lion in incen­tives over the last eight years. But the Good Jobs First report shows that only 28,375 relo­cat­ed jobsjust 0.23 per­cent of the 12.2 mil­lion jobs Texas had in 2003actu­al­ly mate­ri­al­ized in that span of time, the impli­ca­tion being that Texas spends much too much time and mon­ey on cor­po­rate raiding. 

Pro­grams like the Enter­prise Fund cre­ate a domi­no effect or race to the bot­tom,” in the opin­ion of LeRoy, where a state is either a preda­tor” like Texas, over­ly focused on attract­ing busi­ness­es, or prey,” like Illi­nois, reac­tive­ly spend­ing mon­ey to retain businesses.

State Rep. Jack Franks, a Demo­c­rat from Wood­stock, who wrote a law last year enhanc­ing dis­clo­sure of the EDGE pro­gram, says the new data brings to light that the gov­er­nor does not have a cohe­sive struc­ture in terms of job reten­tion and growth,” Franks says.

That’s a chal­lenge when the likes of Per­ry, Walk­er, Daniels and Kasich are just around the corner.

Matthew Blake is a free­lance jour­nal­ist based in Chica­go. He has writ­ten for the Chica­go Jour­nal, Wash­ing­ton Month­ly, Wash­ing­ton Inde­pen­dent and The Nation, among oth­er publications.
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