Illinois again finds itself at the negotiation table with a major employer tired of paying the state’s 9.5 percent corporate income taxA corporate income tax (CIT) is levied by federal and state governments on business profits. Many companies are not subject to the CIT because they are taxed as pass-through businesses, with income reportable under the individual income tax. (the 4th highest in the nation). Agricultural company ADM is mulling moving its headquarters out of Illinois, and the legislature seems ready to offer $24 million in targeted taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. relief if the company stays. Illinois has also done this recently with Sears, Motorola, and the Chicago Mercantile Exchange. (ADM says they’re following that precedent; a new wrinkle is that Gov. Pat Quinn (D) is belatedly insisting that the Legislature adopt a pension reform before he considers any tax legislation.)
All these maneuverings are symptoms of a larger problem: Illinois has an uncompetitively high corporate tax rate. Instead of charging a high rate and handing out exemptions to certain companies, Illinois should lower the rate for everyone. Such a change would entice companies and promote economic growth while making future arbitrations over tax incentives unnecessary.
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