Canadian manufacturer to get $1.1M state tax break deal, local property tax breaks

Canadian manufacturer to get $1.1M state tax break deal, local property tax breaks

The Brandt Group of Companies inked a deal through Illinois’ state tax credit program and will receive property tax abatements from multiple local governments.

Another company will receive tax breaks in exchange for bringing badly needed jobs to Illinois.

The Brandt Group of Companies, a Canadian manufacturer, agreed to separate tax break deals in which the company will receive both a $1.1 million tax break through Illinois’ Economic Development for a Growing Economy, or EDGE, tax credit program, as well as property tax abatements from local governments, according to the Pantagraph.

In addition to the state EDGE agreement, Brandt also got a deal worth at least $630,000 in property tax abatements from McLean County, Normal Township, the McLean County Unit 5 school district and other taxing bodies, the Pantagraph reported.

As part of the deal, Brandt will purchase the Kongskilde Industries plant near Hudson, Illinois, bringing an estimated 300 to 500 jobs to the area, according to the Pantagraph. In order to get the property tax abatements, Brandt will have to hit job milestones, including having 50 local employees in 2018 and 300 by 2024.

While good news for the workers and families who will benefit from the jobs the new investment will create, ultimately others will have to compensate for the tax dollars the state and local governments will forego in connection with the deal.

Though McLean County Unit 5 approved the decision to give Brandt a property tax abatement deal in a 5-2 vote Nov. 13, board members balked at having to give up tax dollars that would otherwise go to the district.

“It sounds like Brandt is a great company and would be very good for the community, but I’m not understanding why this should be on the backs of our kids,” said Taunia Leffler, one of the two McLean Unit 5 board members who voted no to the abatement, according to the Pantagraph.

Likewise, the Normal Township Board of Trustees approved the abatement in a 3-2 vote Nov. 22.

“They choose (to come here) because we are struggling and so we’ll take whatever deals that come our way,” said Normal Township board member Sam Quigle after a meeting on the Brandt deal, according to the Pantagraph. “I want to be the community that jobs come to us and they say, ‘What can we give you?’ instead of ‘What can you give us?’”

Since 2001, the Illinois Department of Commerce and Economic Opportunity, or DCEO, has inked nearly $1.5 billion worth of EDGE deals with various companies. DCEO claims that between the start of EDGE in 2001 and Dec. 31, 2016, the program has created more than 37,000 jobs through 859 signed agreements.

As illustrated by the deal with Brandt, companies don’t only receive tax breaks from the state. They often get local property tax abatements through separate deals with local governments. This forces local governments that give these abatements, whether cities, school districts or counties, to look elsewhere for revenue, borrow or make spending cuts.

Illinoisans should be wary of these kinds of state and local tax break deals. They shift companies’ tax burdens onto other taxpayers, divert revenues from local governments, and do not necessarily foster widespread jobs growth.

A 2015 poll from the University of Chicago’s Booth School of Business showed a plurality of economists were unsure whether giving tax incentives to specific firms actually outweighed the costs to the city or state. And a majority of those same economists disagreed or strongly disagreed with the idea that the U.S. benefits as a whole when cities and states compete with each other for firms by giving tax incentives.

Small businesses are the engine of Illinois’ jobs growth. Businesses with fewer than 50 employees created 75 percent of net new jobs in Illinois in 2016. And during the economic recovery from 2011 to 2016, businesses with fewer than 500 employees created 79 percent of net new jobs in the Land of Lincoln.

Instead of focusing on one-off deals with big companies at the expense of state and local taxpayers, lawmakers should make broader reforms to ensure a more competitive environment for all businesses. That requires tackling problems such as Illinois’ massive property taxes and Illinois’ highest-in-the-region workers’ compensation costs. It also doesn’t help small businesses that lawmakers passed the largest permanent income tax hike in state history in July, which hasn’t even resulted in a balanced budget for the state.

State and local policymakers should resist the urge to go after big deals that make for good headlines, and instead focus their efforts on passing pro-growth reforms to ensure a level playing field and foster prosperity for all.

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