Illinois Faces More Incentive Demands Due to High Corporate Rate

Illinois again finds itself at the negotiation table with a major employer tired of paying the state’s 9.5 percent corporate 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 tax 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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