New ILEPI indicates Illinois being shortchanged by corporate subsidies

Incentives often don’t deliver as promised; outperformed by investments in education, infrastructure

By Dee Longfellow

For The Independent

According to a new research series released by the Illinois Economic Policy Institute (ILEPI), billions of dollars in state and local tax subsidies for corporations have yielded far fewer economic benefits than the same level of investment made in infrastructure and education. Some people will visit many websites to make similar decisions for which way to take these investments, but the state has a set system. Also, it likely comes as no surprise that instead of aiding blighted areas most in need of economic development, Illinois subsidies have largely favored affluent communities.

While ILEPI is focused on the history and performance of more than $5 billion in Illinois corporate tax subsidies, the research comes on the heels of two neighbor states, which have caused eyebrows to raise over their own programs to draw businesses. Wisconsin has been called out for offering a $3 billion package to lure electronics manufacturer Foxconn. In addition, Indiana recently offered a $7 million subsidy to save jobs at a Carrier plant.

“The enormous strain on public budgets across the Midwest and the intensifying efforts to lure or retain employers with large tax subsidies cry out for review,” said ILEPI Policy Director Frank Manzo IV. “The fact is, taxpayers are too often not getting a good return on their investment and, absent much stricter accountability standards on the companies that receive these handouts, other spending priorities would do far more to benefit the economy and improve the region’s economic competitiveness.”

According to Good Jobs First, Illinois has given a sizable number of state and local tax subsidies to three of Illinois’ largest companies – Sears, Mitsubishi, and Motorola. Those three corporations have received almost $900 million or roughly 20% of all tax subsidies in Illinois since 1985. One of the co-authors of the study claims taxpayers’ investment in these three companies has actually resulted in the elimination of jobs. Investing in certain areas can have a ripple effect on the economy helping out those who are in need. Getting started in investments does not mean leaping right in, building up a portfolio using new resources such as cryptocurrencies, with websites like https://kryptoszene.de/kryptowaehrungen-kaufen/bitcoin-ohne-anmeldung/ being able to elaborate on this further, will help those just starting, so they are then able to invest in what they would like to as time goes on.

“In all three cases, massive amounts of money were provided to companies either threatening to leave the state or locate elsewhere,” noted study co-author Mary Craighead. “In the case of Sears, the impact was even more devastating, since the company moved more of its operations into the suburbs, eliminating jobs that were once accessible to the state’s most disadvantaged urban communities.”

Overall, ILEPI noted that the distribution of subsides is not necessarily tied to population trends or socio-economic needs of given communities or neighborhoods. One example cited was Hoffman Estates, a village which accounts for just 0.4% of Illinois’ population, received 26% of all state corporate tax subsides ($520 million). Meanwhile, southern portions of Chicago and Cook County – where population density, poverty, and unemployment rates are higher than state averages – have seen a disproportionately smaller share of tax subsidies than their more affluent neighbors to the north.

“The data suggest that Illinois’ state and local tax subsidy policies favor municipalities that are majority white, have poverty rates below the state’s average, and median incomes above the state average,” Craighead said. “Instead of lifting disadvantage and undeserved communities, these policies appear to be expanding social and economic inequality.”

Using industry standard software, ILEPI compared the economic impact of the inflation-adjusted $288.5 million that Illinois taxpayers have annually spent on business tax subsidies since 2000, against comparable investments in infrastructure, education, and middle-class tax relief.

“When compared to the impact of other potential investments that state and local governments could be making, it is clear that Illinois’ current business tax subsidy policies have been an inefficient economic development tool, at best,” said Manzo. “Alternatively, if Illinois had used the $288.5 million per year they are currently spending on business tax subsides to help balance public budgets, it could have potentially avoided credit rating downgrades that have already cost taxpayers and reduced investor confidence.”

ILEPI’s analysis includes a detailed set of proposed reforms to improve the success and accountability of tax incentive programs to corporations. The Institute suggests tying receipt of subsidies to more specific job creation goals and wage and benefit standards; more consistent and uniform enforcement of accountability measures; developing a comprehensive economic development strategy which would better focus on communities most in need; and, the reallocation of subsidy dollars into infrastructure or job training programs that improve overall economic competitiveness.

“As the state continues to grapple with over $251 billion in unfunded pension liabilities and $15 billion in overdue bills, effectively using taxpayers’ money is of the utmost importance,” Manzo said. “Ultimately, we believe it is in the state’s best interest to continually evaluate its subsidy practices and promote balanced policies.”