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Lower the tax rate…or else.  Continued threats from Illinois business lobbyists warning that businesses will leave the state have forced the Illinois state legislature to order a joint House-Senate Revenue Committee to review Illinois’s corporate tax structure.  Companies like Caterpillar and the Chicago Mercantile Exchange continue to complain about the corporate tax rate and threaten to skip town and find another state to do business in if the committee doesn’t respond with dramatic rate cuts.

Illinois Senate President John Cullerton says the committee will not only look at corporate tax rates, but will also consider reducing corporate subsidies and special exemptions to ensure any change in the rate won’t reduce the overall corporate tax revenues.

Many businesses have come out in support of eliminating loopholes, not surprisingly most of which pay the full statutory corporate tax rate.  David Vite, president of the Illinois Retail Merchants Association, said that “the most important thing is to have a fair structure that makes Illinois efficient and as attractive as it can possibly be so we can get more businesses here to spread the burden of running the government more broadly.”

A myth that the corporate tax rate is the primary factor in business decision-making just won’t die.  A recent CTJ article showed that business executives consider taxes low on their list of priorities.  The tax rate is just one small factor that businesses take into consideration when deciding what state will give them the best chance to be profitable.  As Doug Whitley, President and CEO of the Illinois Chamber of Commerce said, “robust economic activity also requires sustained and significant investments in transportation infrastructure…educational opportunities that ensure a quality workforce and support retraining when required.”  The fact is, these investments all cost money, and if corporations are going to benefit from them they should contribute to their funding, just as individual Illinois taxpayers do.

Similarly, when a family is looking for a place to settle down, low taxes are pretty low on their list of priorities.  They want to know about the educational system, the community, and whether or not this is a good place to raise their children. Everything that makes a community  appealing to that family is supported by the tax base.

You wouldn’t expect a family to uproot itself and move to another state simply because they could save a couple hundred dollars in taxes next year.  Why would a corporation?

Lost in this tax debate are the vital public services that support the growth of the private sector.  Corporate taxes are simply one cost of doing business.  This is not to mention that all of these complaining companies have failed to mention the extraordinary financial and logistical costs of moving an entire business to another state.

We can always expect business leaders to call for rate cuts that would fatten their profit margins, but we shouldn’t expect Illinois’ elected officials to believe they’re acting in the public interest.

Photo via spudart Creative Commons Attribution License 2.0