By STEVE BINDER
Illinois Correspondent
 
SPRINGFIELD, Ill. — For the second time this year, a top U.S. agriculture firm based in Illinois is considering leaving the state because of the corporate tax structure.

The head of CME Group, Inc., parent company of the Chicago Mercantile Exchange and owner of the Chicago Board of Trade and the New York Mercantile Exchange, said last month the state’s tax structure is penal. CEO Craig Donohue explained because of Illinois’ high tax burden, CME is considering a move of its headquarters to Florida, Tennessee or Texas – states he described as more tax-friendly.

“Our tax situation is untenable,” he said. “I don’t think CME Group is different from other companies” that relocate.

It was Peoria-based Caterpillar, Inc. this spring that first made headlines, criticizing a proposed income tax increase that later passed the Illinois General Assembly, suggesting the giant equipment maker may move its headquarters to another state.
Both threats have led to the scheduling of four hearings throughout the state, set by the revenue committees from the state House and Senate; both chambers are controlled by Democrats. The first two hearings drew few commenters; the next two are set for 10 a.m. Aug. 23 at the Capitol Building in Springfield and at 10 a.m. Aug. 30 at the Marion Cultural and Civic Center in Marion.

Caterpillar officials said they will be represented at a future hearing by the Illinois Manufacturers’ Assoc. Also expected to testify are representatives from the Illinois Chamber of Commerce and the Illinois Retail Merchants Assoc.

Donohue hasn’t indicated yet whether CME will offer comments at one of the hearings. Jim Nelson, a vice president with the manufacturers’ group, said he doesn’t expect major changes in the code, but is thankful lawmakers are interested.
“We’re encouraged by the fact that the General Assembly wants to take a look at it,” Nelson said.

Facing growing state debt, lawmakers narrowly approved an increase in the income tax rate from 4.8 to 7 percent for corporations, and from 3 to 5 percent for individuals. Coupled with the state’s property replacement tax, levied only against corporations, the tax impact on companies reaches 9 percent, among the highest in the United States.

J. Fred Giertz, an economist at the University of Illinois, said the state’s tax code long has ignored significant technological advances.

“The real problem is firms now, aside from kind of heavy manufacturing firms, are very mobile with the Internet and transportation being so good,” Giertz said. “Firms have the option over the long run of moving their (operations), either really moving them or moving them in an accounting way.”
The manufacturers’ association hopes the hearings focus on more than just the income tax. “They can look at the sales tax, they can look at the property tax, they can look at the utility tax. There are a number of things that companies have to pay,” Nelson said.