Businesses are sensitive to their environments. If it costs a lot of money to operate somewhere, they’ll leave.
Illinois politicians have learned this the hard way – between 1995 and 2012, Illinois lost an average of 225 businesses per year on net. With a combination of high corporate income taxes and fees, plus long wait times for permits, Chicago and Illinois politicians have had to resort to offering hefty financial incentives to the businesses they want to attract.
That was the case when Lagunitas Brewing Co. Founder Tony Magee reached out to Chicago officials about opening a new brewery in the city. Magee, a suburban Chicago native, opened Lagunitas in northern California 10 years ago. His new brewery, located on the West Side, will employ 125 people.
But Magee didn’t want a handout from City Hall – he just wanted the city of Chicago to get out of his way so he could bring his business home.
“You start realizing you make the world around you by the decisions you make as you move through it and if I don’t feel like the government should be looted [or] whored out for businesses ... we don’t need it ... so why ask for it?” Magee said to the Chicago Sun-Times editorial board. “I’d rather they have more midnight basketball and fill potholes. Don’t give it to me.”
Turning down a handout from the city is a bold and noble move. Magee didn’t have to say no – he could’ve accepted however much Chicago officials were prepared to offer him and gotten ahead. Other beer businesses have done it: MillerCoors received $24 million in tax breaks and subsidies to relocate to Chicago in 2010, bringing with them about 400 jobs.
The company’s net income that year? $1.1 billion.
By saying no to corporate welfare, Magee sent a signal to the city – that he’s not willing to keep squeezing small business owners who would have to reach deeper into their pockets to finance another crony tax break.
That’s not the case for many businesses. Illinois and Chicago politicians have gotten into the habit of doling out millions of taxpayer dollars in tax breaks – primarily to large corporations. Illinois has a laundry list of recipients when it comes to tax-relief favors:
- CME Group receives $77 million annually
- Motorola receives $10 million annually
- Sears receives $15 million annually
The list goes on – and it shouldn’t come as a surprise that Illinois politicians have to bribe big companies to remain in such an unfriendly business environment.
At 9.5 percent, Illinois’ corporate income tax is the fourth highest in the U.S. The state charges $500 to anyone who wants to start a limited liability company, or LCC (an effort to reduce the LLC fee to $39 died this spring). In Chicago, it can take months for businesses to receive all of the necessary permits required to open up shop.
And while Magee said no to financial incentives and stayed, other companies look at financial offers from Illinois and still choose to ship out, fearing the hammer of a high tax burden when their good favor runs out.
Office Depot Inc. walked away from a possible $53 million in Illinois tax credits in favor of moving its headquarters to Florida. That move cost Illinois 1,600 jobs.
By continuing to artificially prop up big businesses by cranking up income taxes on small businesses, Illinois and Chicago politicians are hollowing out the middle, creating an environment in which it is nearly impossible for the little guy to succeed.
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