Deep-Dish Crony Capitalism
Chicago has perfected it. William McGurn writes in the WSJ about how it works:
Raise taxes on everyone--and then cut side deals with those big enough to lobby for special relief.The legislature is considering this limited tax relief because three corporate mainstays of greater Chicago have threatened to leave without it. One is the CME Group, operator of the Chicago Mercantile Exchange, the world's largest futures exchange by volume. Another is the Chicago Board Options Exchange (CBOE), the world's largest options exchange. The last is Sears, one of America's oldest and most famous retailing giants.
Earlier this month, CME chairman Terrence Duffy told Illinois lawmakers that his company is entertaining "very, very lucrative offers" from other states. Meanwhile, his counterpart at the CBOE, Bill Brodsky, says his exchange needs relief from a tax code that is "virtually punitive." Sears has chimed in too, with its general counsel reporting that it has a $400 million offer from a nearby state to relocate there.
To be fair, these companies have a case when they complain that Illinois is making them less competitive. Take CME. Because its world-wide sales are taxed in Illinois, CME accounts for almost 6% of all state corporate taxes. On top of this, Mr. Duffy says that the "temporary" corporate tax increase passed in January is now costing his company an extra $50 million a year.
CME and the other beneficiaries of this special tax bill would have a far better case, however, if instead of pushing for special treatment for themselves, they used their clout to argue for a more market-friendly environment overall. After all, if the state's tax treatment is making it hard for Sears and CME, the family restaurant or mom-and-pop shop down the corner is probably feeling the pinch too.
Shocker.
States that tax heavily do not draw in businesses.
Businesses that move to states solely for tax reasons are quick to leave when the reason to be there changes.
So the idea that you can draw in big outside businesses with low taxes, then keep them there after you've raised taxes or placed new taxes upon them, is simply ludicrous.
If states want to draw in additional tax revenue, they need to focus on growing businesses IN STATE. That means making their state a startup friendly place.
A local brick and mortar that builds its business in someplace, someplace USA, has its roots there and will be likely to grow itself there first and foremost. If it expands out of state, it isn't as likely to change its headquarters as a business that has grown up elsewhere and moved only for tax reasons.
We need politicians at all levels that actually understand these things.
Robert at November 15, 2011 2:24 AM
Back in the 80's, our company moved from downtown LA to Glendale because LA's business tax on gross receipts was killing our bottom line. We moved into the top floor of a new building at a lower lease cost and the tax savings the first year more than paid for the cost of the move. Forcing state and local governments to compete is just one more lever to use against politicians. The same principal works against national governments as well.
BarSinister at November 15, 2011 6:34 AM
McGurn makes the naive argument that these companies should be
making the general case rather than looking for private exemptions.
It's the difference between the ideal and the achievable. They
might have the leverage to get themselves exempted. The chance of
the Chicago politicians foregoing a lucrative general tax is low.
Though, the politicians could probably call Sears' bluff. Sears
probably can't afford to move because the expense of moving would
likely accelerate their slide into bankruptcy.
Ron at November 15, 2011 10:03 AM
It's not just a Chicago thing.
How many San Francisco businesses that are friendly with Nancy Pelosi were exempted from Obamacare?
Oh yeah, this is change we can believe in.
Conan the Grammarian at November 15, 2011 1:25 PM
Ron beat me to it: they might be able to get their business some relief, but if they tried to leverage it to help businesses in general, the politicians would find some way to screw them as punishment.
And will probably try to find some way to screw them before leaving if they do decide to move.
Firehand at November 15, 2011 3:29 PM
Just look at Omnicare
www.businessweek.com/ap/financialnews/D9PRRL3G2.htm
The difference is less that 10 miles from Covington, KY to Cincinnati, OH. But they got a hell of a tax deal.
Anonymous Coward at November 15, 2011 8:13 PM
"How many San Francisco businesses that are friendly with Nancy Pelosi were exempted from Obamacare?"
I don't know.
How many?
Gog_Magog_Carpet_Reclaimers at November 16, 2011 9:12 AM
Amy Alkon
http://www.advicegoddess.com/archives/2011/11/15/deep-dish_crony.html#comment-2769575">comment from Gog_Magog_Carpet_ReclaimersYes, how many?
If you throw that out there, you also need to throw the answer out.
Amy Alkon
at November 16, 2011 9:26 AM
More than 1,000 waivers have been issued as of May 2011.
More than three dozen businesses in Nancy Pelosi's San Francisco district were awarded waivers. In the month of April alone, businesses in Pelosi's district accounted for 20% of the waivers issued. Businesses exempted in Pelosi's district included luxury spas and hotels (Hotel Nikko, Tru Spa, Compton Place) as well as high-end restaurants (Boboquivari, Cafe des Amis, Cafe Mason).
Lest you think I'm picking on Ms. Pelosi, other powerful Democrats also got the exemptions.
Seattle's REI was granted a waiver. The company's CEO was a major Democratic donor as well as a champion of Obamacare.
Other waiver recipients included labor unions, large corporations, financial firms, state and local governments, and the AARP (which championed Obamacare for seniors).
Conan the Grammarian at November 16, 2011 12:24 PM
One more thing. I think that there are quite a few travel insurance websites of respected companies that allow you enter holiday details and obtain you the quotations. You can also purchase the particular international travel cover policy on-line by using your credit card. All you should do would be to enter your current travel details and you can start to see the plans side-by-side. Simply find the program that suits your financial budget and needs then use your bank credit card to buy the idea. Travel insurance on the internet is a good way to take a look for a reputable company regarding international holiday insurance. Thanks for giving your ideas.
hoteles en melgar cafam at December 2, 2011 12:19 AM
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