Tax Analysts Blog

Feckless Legislators and Corporate Welfare

Posted on Nov 6, 2013
Archer Daniels Midland Co. is big. In 2012 the food processing and commodities corporation had $90 billion in sales and about $4 billion in operating income. The company has been headquartered in Decatur, Ill., for 40 years and now wants to move. The good news -- for the state -- is that ADM wants to move its executives to Chicago. But it has said that before it announces that move, it wants $24 million in tax breaks to stay in Illinois. It's possible ADM might move to San Francisco or Manhattan or even Miami. However, it will keep at least 4,000 workers in Decatur. Why? Because Decatur is the soybean capital of the world, and ADM sells soybeans. When you sell soybeans and stuff like that, it's good to be in the Midwest.

A while back, during an Illinois House Revenue and Finance Committee hearing, Rep. Barbara Flynn Currie (D) characterized an ADM executive's testimony as "essentially blackmailing the state . . . saying, 'If you don't go through this hoop for us, we may think about going somewhere else.'" A big company trying to blackmail a state into giving it tax incentives -- that's terrible. Unfortunately, it happens every day.

The sad truth, however, is that ADM is acting rationally. Illinois companies like Sears, CME Group Inc., Navistar, and Motorola have asked for tax incentives to do what they were going to do anyway. And the brave souls who run Illinois gave those companies the tax breaks they wanted. If I ran a big corporation in Illinois, I would have my lobbyists asking for tax breaks daily. Why not? The tax incentive racket is a profit center for most corporations in Illinois. Is it blackmail? Sure. But it is cold, calculated, rational blackmail.

As I write this, the Illinois legislature is contemplating giving ADM what it wants. The good news is that there was some backlash about subsidizing a company to move within the state (and move its headquarters from a place with high unemployment to a place with low unemployment). The bad news is that backlash has seemingly subsided. ADM will get its incentives. Unfortunately, state lawmakers and governors seem to forget that they have the power to just say no.

Read Comments (1)

edmund dantesNov 6, 2013

Missing from your analysis, Illinois has extraordinarily high taxes on
businesses, which is why so many of them are leaving. If Illinois had low
taxes for everyone, the state wouldn't have to bribe anyone to stay. But that
eliminates the chance to wring political contributions out of the business
community, so it has no chance of happening.

The relief granted to various Illinois companies has, for the most part, simply
brought their tax burden down to a realistic and tolerable level. Remember,
these businesses have thousands of employees who are also paying taxes.

Personally, you couldn't pay me enough to live and work in Chicago, so I am
puzzled as to why ADM doesn't put their headquarters somewhere liveable, and
forget the tax angle.

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