Illinois Policy 12/20/2016
The expiration of the state’s EDGE program – which has given large companies more than $1 billion in tax credits the last 15 years – is good news for taxpayers and should encourage lawmakers to pass real reforms.
Illinois has given companies more than $1 billion in tax credits in the last 15 years, but the state’s corporate handouts are about to end – at least temporarily.
This is a perfect opportunity to end the Economic Development for a Growing Economy, or EDGE, program altogether. Propping up politically favored companies with taxpayer dollars is wrong, but the problem is even worse with EDGE as the state isn’t getting a return on its investment. Though the program has doled out $1.3 billion since 2001, Illinois has lost 113,000 jobs over that time period.
The EDGE program is set to expire Dec. 31, as Gov. Bruce Rauner and legislative leaders haven’t agreed on a plan that would keep it in place. Tax credits will still be available to companies under existing agreements, but new tax credits cannot be issued under the program if it expires.
Todd Maisch, CEO of the Illinois Chamber of Commerce, told Greg Hinz at Crain’s Chicago Business that losing the EDGE program “is not a plus, there’s not a question about that.” But that perspective ignores taxpayers, who certainly should have questions about the program, starting with why the amount of tax credits has increased so drastically each year.
In 2001, the state gave out just $6.5 million in taxpayer handouts to companies. That number steadily increased over the years, before ballooning under former Gov. Pat Quinn. The state increased the EDGE credit program by nearly $140 million under Quinn, peaking at more than $206 million issued to companies in 2014 alone, the year he left office. In October 2014, a month before Quinn was up for re-election, he authorized $37.4 million in major grants to companies and even used those examples as part of campaign ads suggesting there was jobs growth under his administration.
But handouts to large companies do not equate to jobs growth. Since the EDGE program began in 2001, the state has lost 113,000 payroll jobs on net, despite the Department of Commerce and Economic Opportunity, or DCEO, citing 34,000 jobs created and another 46,000 retained from the program. The statistic on retaining jobs is even legally suspect: The law that created the program specifically says the credits can only be used to create new jobs, and a lawsuit was filed against the DCEO in 2015. That lawsuit, filed by the Liberty Justice Center, claimed the EDGE program used as much as $500 million in tax credits to retain current jobs, a blatantly illegal practice.
And beyond illegal practices, DCEO, which runs the EDGE program, has cut more special deals for corporations over the years than just what the tax-credit program offers. Amazon – an internet, retail giant worth more than $250 billion – is receiving $2 million in annual tax breaks over the next decade because it added 2,000 full-time jobs to Joliet, Ill. That agreement – made under Quinn and expanded by Rauner – follows a 2014 agreement the state made with AAR Corp. for $15 million in tax credits in exchange for 500 jobs, and a 10-year, $12 million with eBay for 360 jobs.
More recently, the EDGE program was part of a major headline when the state used as much as $1.3 million to bribe ConAgra Foods to relocate to Chicago from Omaha, Neb.
The state shouldn’t shuffle taxpayer money to corporations and hope for jobs growth. Instead, it should create an environment that allows all companies to thrive.
That means reforming Illinois’ workers’ compensation system, which is uncompetitive with the rest of the Midwest; and freezing its highest-in-the-nation property taxes. Those two actions alone – as part of a responsible, balanced budget – would attract new businesses to the state and encourage those eyeing a move out of the state to remain.
Businesses like Hoist Liftruck, a forklift manufacturer that moved its operations out of Illinois and into Indiana in 2015, specifically cited both the state’s unfair workers’ compensation system and burdensome tax climate as reasons to ditch the Land of Lincoln.
“Forget incentive money,” Hoist Liftruck CEO Marty Flaska said at the time of the move, “when you look at the pure cost for me to do business in Illinois, the choice is clear.”
For every taxpayer-funded deal bringing handfuls of jobs from ConAgra, Amazon or eBay, there are several more stories like Hoist’s and others who are moving high-paying, blue-collar jobs across borders to more pro-growth states.
But even with mounting evidence of out-migration of jobs from Illinois, politicians in Springfield for too long have favored special deals instead of real economic reforms. Even now, upon the likely expiration of the EDGE program, state Sens. Pam Althoff, R-Crystal Lake, and Melinda Bush, D-Grayslake, already moved to file a bill keeping the program, Crain’s Chicago Business reported. Meanwhile, legislative leaders refuse to budge on passing any sort of real, economic reform that could make the state more competitive with pro-growth neighbors like Indiana, Wisconsin and Iowa.
The EDGE Program is unfair for taxpayers and small businesses, and does nothing to create a better business environment in the Land of Lincoln. Upon its expiration, lawmakers should get to work on pro-growth solutions that would make Illinois a truly competitive state.