Hillary Gowins of Crains Chicago business asserts that Edge tax credits do not actually create jobs in Illinois. Gowins used the shutdown of Deerfield, IL's major pharmaceutical company, Takeda, as an example of this. Within the years of 2003-2013 Takeda committed to creating 586 jobs and as a result, received over $60 million in tax credits. However, the issue is not the program itself. The problem is the disproportionate allocation of the program's funds. ENJEN provides small to mid market companies the same opportunities for governments incentives as the Boeings, Amazons, and Foxconns of the world. As a result, jobs are organically created. That is a profoundly more responsible use of taxpayer dollars. Full Article below.
Do tax credits bring jobs? Not in Illinois.Hilary Gowins argues that Edge credits to businesses aren't working in a state that hasn't addressed its debt and pension crisis.
NewscomTakeda Pharmaceuticals, one of the biggest Edge recipients, recently announced plans to shutter its Illinois headquarters and move out of state.
Illinois politicians will be the first to tell you the state needs all the revenue it can get. Yet from 1999 through 2017, they issued $1.65 billion in tax credits to major companies across the state. Is the investment paying off?
The state's tax credit program, Edge—which stands for Economic Development for a Growing Economy—grants credits to companies that promise to create jobs and invest in Illinois. Takeda Pharmaceuticals, one of the biggest Edge recipients, recently announced plans to shutter its Illinois headquarters and move out of state. Takeda's decision to close its Deerfield headquarters calls into question the efficacy of the Edge program. The biopharma giant reportedly is consolidating its operations in the Boston area as it works through its $62 billion acquisition of Irish drugmaker Shire.
From 2003 to 2013, in exchange for a promised 586 jobs, the state of Illinois gave Takeda $60 million in tax credits (that number is likely higher, since the company was issued credits in 2014, 2015 and 2016—but those numbers aren't available). Now those jobs—and more than 400 others—are gone from the state.
Takeda is hardly alone. Other Edge recipients have shed jobs even while receiving tax credits. For example, as it announced layoffs, Sears was allowed to keep its 2016 credits worth $15 million per year. And despite taking a 10-year, $20.8 million Edge tax credit deal in 2015, Capital One announced in November 2017 that it would lay off 452 employees at its Rolling Meadows office.
State records indicate that the $1.65 billion issued in Edge tax credits yielded over 41,000 jobs. But the "growing economy" portion of the program's name falls short if you look at the state's overall job creation from 1999 through 2017. During that time, the state saw just 78,400 jobs created overall. That's a sluggish 1.5 percent growth over 18 years—a rate some states see in just one year's time. For context, look next door to Indiana. The Hoosier State, with half the population of Illinois, added 82,600 jobs from 1999 through 2017, for 3.2 percent growth. And for an even more stunning comparison, consider Texas, which has experienced massive population growth in the past two decades thanks in large part to its low-tax, business-friendly environment. The Lone Star State added 2.67 million jobs over those 18 years, for a whopping 34.5 percent growth rate.
Businesses are like people—they respond to incentives. They like it when they can save money. But they really like it when they feel confident in the long term that a state's business climate is going to meet their needs and allow them to thrive.
Illinois' dysfunction doesn't offer that confidence to investors. The state is $7 billion in debt. Illinois has the lowest credit rating in the nation, one notch above junk, and has been downgraded by the major ratings agencies 21 times in less than 10 years. Pension obligations take up nearly 25 percent of the state's expenditures, a significant jump from less than 10 percent before the recession. And Illinois is one of just two states to suffer four consecutive years of population loss, which translates to a shrinking talent pool (and tax base).
Illinois isn't in a position to forgo revenue, and no amount of tax credits can overcome the political instability and fiscal uncertainty the state presents to people considering a massive investment of capital and energy here.
Almost all states have tax credit programs intended to entice big-name companies to plant roots. Those in favor of this kind of corporate welfare argue that because of the policy's ubiquity, it doesn't make sense not to have one of our own. But if every other state employs this kind of incentive, it's important to consider what else successful states are doing that we aren't. Indiana and Texas offer a pretty clear mandate—lower taxes and fewer regulations inspire investment and confidence.
If Illinois politicians want sustainable jobs growth, they need to do things that signal to investors that the state is open for business: Commit to no new taxes, address the pension and debt crises, and provide stability in Springfield.
Hilary Gowins is vice president of communications for the Illinois Policy Institute,a think tank that promotes free markets and limited government.
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