A number of Illinois corporations are threatening to leave the state unless their taxes are cut and state government is reduced in size. Governor Quinn and Chicago's Mayor Rahm Emanuel are desperately trying to negotiate peace with Republican leaders, who have proposed a 50% state tax cut for the particularly contentious Chicago Mercantile Exchange and Chicago Board Options Exchange. For the rest of us, the state tax rate is up 66%, our biggest city has the highest sales tax in the country, and utility and transportation fees are being increased.
But Illinois corporate taxes are NOT too high, at least for top-earning companies. The rates may be high, but the amounts paid are not. A review of corporate 10-Ks provides the facts. If just 20 large Illinois firms had paid state taxes at the required statutory rate (7.3%) over the past three years, an additional $7.5 billion would have been returned, or about half of the state's current deficit.
For 20 of the largest Illinois corporations, with a total of $157 billion in net income, only $3.5 billion was paid in total state taxes.
That's a 2.2% tax rate.
Caterpillar CEO Doug Oberhelman recently said, "Legislators in Illinois have created an environment that is unfriendly to business and investment." Caterpillar paid less than 1%.
The following is a list of the twenty companies with their effective 3-year state tax rates:
Sara Lee 0.0%
Baxter Int'l 0.9%
Archer Daniels 1.2%
Deere & Co. 1.6%
Kraft Foods 1.8%
Cisco Systems 1.8%
Fortune Brands 2.1%
Abbott Labs 3.0%
Illinois Tool Works 3.0%
Walgreen Co. 3.2%
Exelon Corp. 3.9%
United Stationer 4.0%
W W Grainger 5.3%
Sears Holdings 5.8%
What about the Chicago Mercantile Exchange (CME) and Chicago Board Options Exchange (CBOE)? While paying a fair share of federal and state taxes, their combined profit margin (income as a percent of revenue) over the past three years is higher than any of the top 100 companies in the nation! CME took a stunning 54% of its $8 billion revenue as clear profit. But they're demanding a tax break.
For over 100 years CME has used the city's location, reputation, technology, and infrastructure to build up the nation's most lucrative business. Now they're threatening to leave.
Meanwhile, Illinois business executives remain quiet about the proposal for a fair-minded and sensible financial transaction tax (FTT). Fair-minded because the rest of us pay a 6-10% sales tax on a pair of shoes while millionaire investors pay ZERO percent on a financial transaction.
How much money could be generated by an FTT in Illinois? CBOE handles over a billion contracts a year with a dollar volume of close to a trillion dollars. A one-quarter of 1 percent tax on contracts would return $1.5 billion dollars, enough to pay off Chicago's budget deficit.
The CME Group, which includes the Chicago Board of Trade, handles about 3 billion annual contracts worth well over 1 quadrillion dollars. One-thousandth of 1 percent of that (about a dollar for every $100,000) would pay off the total budget deficit of Illinois.
In Illinois, elected political leaders don't stand up to the businesspeople who make record profits and then threaten to leave the state. If you live in one of the other 49 states, watch out: it may be your problem next.