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Senate sticks it to business

‘Gotcha’ bill may scare off entrepreneurs

Illinois has a reputation for being an expensive and difficult place to do business, a big reason why the state has the ninth-highest unemployment rate in the country, higher than every state that borders it. Employers want to locate where they are welcome.

So you might expect that the people who write laws in Illinois – land of 8.8 percent unemployment, $96 billion pension debt, $8 billion in unpaid bills – would be falling all over themselves to welcome business.

Think again.

Last week, the Illinois Senate narrowly passed a bill that would require publicly traded companies doing business here to release how much they pay in state income taxes.

The sponsors suggest that something sinister must be going on, because many companies don’t pay state income tax.

“Maybe if we were to find out that there are some very profitable corporations operating in the state of Illinois, we might want to say that maybe they should pay a little more,” House Majority Leader Barbara Flynn Currie said last week.

If companies have earnings in Illinois and they’re not paying state tax on those earnings, we suppose two things could be going on.

n They could be committing fraud. This is why you have prosecutors.

n They could be availing themselves of tax laws enacted by the Illinois House and Senate to persuade them to do their business here.

Does the latter come as a shock to the sponsors of the Senate tax-disclosure bill, that businesses would take advantage of the laws they passed?

Illinois provides certain tax breaks to businesses, such as incentives for research, development, hiring and expansion. Those tax breaks are supposed to make Illinois competitive with other states and other nations. Companies do have choices about where to locate.

Illinois has scrambled to provide more tax incentives to employers who threatened to leave the state after the Legislature last year jacked up the corporate income tax rate to 9.5 percent, the third-highest rate of any state in the nation.

Lawmakers know all about the loopholes, deductions and exemptions. Once again: They created them.

If lawmakers think those tax breaks are a net drain on Illinois – if they’re not prompting the creation or retention of jobs filled by people who earn money and pay income and sales and property taxes here – then lawmakers can eliminate those breaks.

But what the Senate passed last week is not designed to gauge the effectiveness of those tax rules. It’s designed to play “gotcha!”

Gotcha gets you an 8.8 percent unemployment rate.

The proposed law would require publicly traded corporations doing business in Illinois to file an annual statement with sensitive financial information beyond their taxable income and taxes paid. The companies would have to disclose the amount of business income apportioned to the state, for instance, and the amount of property tax replacement liability. Even companies not required to file an Illinois tax return would need to file a separate statement with financial information such as the total sales receipts from purchasers in the state.

The chief operating officer of every company would be required to attest in writing to the accuracy of the information. A late fee of $100 a day would be imposed, as well as other financial penalties for noncompliance. The information would be available to anyone, including competitors.

That worries the business community, for good reason. Under federal law, public companies disclose tax data in mandatory filings to the Securities and Exchange Commission, including aggregated state and local taxes. Every company operates under the same disclosure rules.

Illinois would be putting demands on businesses that are beyond the requirements of most other states, where corporate tax returns are confidential.

Profitable companies are not a scourge, though Illinois seems hell bent on treating them that way.

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