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Are Illinois’ $1.5 billion in tax giveaways working? Who knows?

By   /   February 6, 2014  /   No Comments

By Benjamin Yount | Illinois Watchdog

SPRINGFIELD, Ill. — Illinois is two months into an ongoing investigation over whether $1.5 billion in tax breaks and tax incentives  are working.

The answer is definitively indefinitive: We don’t know.

WHY ARE WE DOING THIS? Franks says if Illinois isn't getting jobs, companies shouldn't get tax breaks.

WHY ARE WE DOING THIS? Franks says if Illinois isn’t getting jobs, companies shouldn’t get tax breaks.

“I have not seen anything that, verifiably, show these things work,” said state Rep. Jack Franks, D-Woodstock, in charge of one of two statehouse committees investigating the incentives.

But Illinois’ economic development office insists its numbers show tax incentives do indeed work and produce jobs.

The numbers from the Illinois Department of Commerce and Economic Opportunity claim tax incentives helped create 4,671 jobs and bring in business investments worth nearly $3.7 billion in 2012.

Franks isn’t buying it.

“DCEO (argues) somehow there is a 4 /12-time return on investment,” Franks said. “But two weeks ago they argued it was an eight-time return on investment.”

Franks said it’s not just that numbers change, but even the state’s success stories aren’t all that successful.

“Even though DCEO has given 770 economic incentives contracts, less than 300 of them have ever been fulfilled,” Franks said. “And very few go to the vast majority of our businesses. Ninety seven percent of our businesses are 20 employees or less, and less than 10 percent of those companies have (gotten an incentive).”

Categories of tax breaks vary, from manufacturers who buy new machines to retail stores that collect sales taxes to big companies that want special treatment to move to Chicago. If they don’t work for most businesses in Illinois, then who do they work for?

Ted Dabrowksi, vice president of policy for the Illinois Policy Institute, said the select few companies with enough clout to get a sweetheart deal are beneficiaries.

“If a company is receiving hundreds of millions of dollars in benefits, sure it’s working for them,” Dabrowski said. “But we have to ask he question: ‘Who is paying for that?’.”

The Illinois Legislature’s Commission on Government Forecasting and Accountability said taxpayers ultimately foot the bill.

“With over $1.15 billion in business-related tax expenditures currently offered, the cost of these job-enticing dollars are significant,” a COGFA report on tax incentives states. “The difficult question becomes, are these tax incentives really worth the cost?”

Franks has doubts.

“The only reason we should be having these incentives for businesses is to create jobs,” Franks said.

Illinois Gov. Pat Quinn’s administration insists the state is creating jobs.

“We are a net importer of jobs,” DCEO director Adam Pollet told lawmakers Wednesday. “We gained 1,400 jobs from business relocation in 2012.”

But Illinois’ unemployment rate, at 8.2 percent, is nearly two points higher than our neighbors and the rest of the nation.

You can contact Benjamin Yount at Ben@IllinoisWatchdog.org and find him on Twitter @BenYount.

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