Madigan One-Ups Rauner

The first thought that hit me when I read of House Speaker Mike Madigan’s proposal to cut the corporate income tax in half was that he was trying to cut GOP gubernatorial candidate Bruce Rauner’s pitch to business off at the knees.

Crystal Lake Chamber Exec Gary Reece introduced Bruce Rauner.

Crystal Lake Chamber Exec Gary Reece introduced Bruce Rauner.

I have heard Rauner make his pitch in various settings–public meet and greets, a Chamber luncheon, privately to businesses people and political gatherings.

He always talks about improving the business climate.  In generalities he talks about government regulations and tax relief.

Madigan Corporate Tax Cut S-t 12-31-14What possibly could help a profitable business–across the board–more than cutting the tax rate in half?

The only corporations who would not benefit would be those not making money and those who have had the lobbying might to carve exemptions in the tax code that result in their paying little or no Illinois state income tax.

Most smaller business are organized so that they pay the personal income tax rate, so Madigan’s proposal would not help them either.

But it certainly shows Democrats are tilting toward business.

The Chicago Sun-Times’ Dave McKenney says that Madigan is one-upping Governor Pat Quinn.

Maybe, but I believe the primary target is Rauner.

McKenney adds that it will give cover to his members at election time, a valid observation.

By cutting the income tax rate for corporations from 7% to 3.5% (no change in that part of the 2.5% business income tax called the Personal Property Tax Replacement Tax), Madigan goes where no other Democrat would dare.

Can you imagine Populist Democrat Pat Quinn’s attack on Rauner had he made such a proposal?

Quinn did not attack Madigan.

One must remember that Madigan is not at all policy-oriented.

It’s all about politics.


Madigan One-Ups Rauner — 2 Comments

  1. …all about politics.

    And money too I’d add. I

    think Madigan understands the hit Illinois Business is taking.

    Workmen’s comp reform and a personal income tax cut would do far more for business than a corporate cut (which I suspect helps a very narrow group) but it’s a start and reflects Madigan’s recognition that a sinking Illinois sinks all boats…including his.

  2. Wonder how much corporate income tax revenue the State receives from the 7% portion, and from how many companies.

    Wonder how much corporate income tax revenue the State receives from the companies that pay less than 7%, and from how many companies.

    The Sun-Times article is interesting.

    Madigan proposes $1.5 billion tax cut for businesses
    by Dave McKinney, Springfield Bureau Chief
    January 30, 2014 9:20PM

    The related article is also interested.
    Chicago Sun-Times
    Experts: Corporate tax cuts will bring jobs, but not net revenue increase
    by Art Golab Staff Reporter
    January 30, 2014 9:16PM

    So assuming the above no net revenue increase is in the ballpark of accuracy, the State will not gain significant revenue.

    But the State would not have to cut as many Corporate Income Tax break deals with companies, which had resulted in a lot of negative press for the Democrats.

    Notice cutting the Corporate Income Tax would only save the State about $1.5 billion over 1 year.

    Compare that to this years Contribution by the State to the five State pension funds (TRS, SERS, SURS, GARS, JRS).

    The 2014 State Pension Contribution is slated to be $4.7 billion with pension reform or $6.7 billion without pension reform.

    If you do not like IPI look up the numbers on the state website.

    Remember to include debt service, which is the repayment of the bond revenue the State received when it issued bonds to fund the pension plan (the state issued pension obligation bonds in 3 separate years).

    Or, look at the State contribution to the State pension funds with and without debt service.

    Including debt service using approximate numbers the State of Illinois contribution to the State of Illinois Pension Funds.

    FY 2008: $2.0 Billion.
    FY 2009: $3.0 Billion.
    FY 2010: $4.0 Billion.
    FY 2011: $5.0 Billion.
    FY 2012: $5.5 Billion.

    FY 2012 State Contribution to State Pension Funds was about $4 Billion without the Pension Obligation Bonds payment.

    FY 2013 State Contribution to State Pension Funds was slated to be about $5 Billion without the Pension Obligation Bonds payment.

    That link belongs to the from the Fiscal Policy Center at Voices for Illinois Children, so we have left and right sources so as not to be accused of a right wing media bias.

    The point is to put into perspective the State Contribution to the State Pension Funds, compared to the revenue received from corporate income taxes.

    Of course the State receives revenue from many different sources, not only corporate income taxes.

    A common theme from some people is let’s get money from those big corporations raking in all that revenue.

    What it seems they don’t realize is there may be less money in that pot than they believe, since the State of Illinois has to be competitive with other States, and when corporate income tax revenue is compared to the pension benefits payments that have been hiked largely as a result of legislative pension benefit hikes and collective bargaining and other salary increases.

    If pension benefits had not been hiked since that magical day in 1970 when the pension protection clause was added to the Illinois State Constitution in December of 1970, we would not be in this huge pension hole.

    If salaries had not been hiked in general beyond private sector salary hikes, we would not be in this huge pension hole.

    That is what people mean when they say the State has a spending problem.

    State spending often has nothing to do with reality but the exchange of campaign contributions and votes from public sector unions and others (there’s all sorts of lobbyists in Springfield) in exchange for favorable legislation from politicians.

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