Capital One received more than $20 million in tax breaks from Illinois in 2015
The state agreed to the tax credits in exchange for Capital One hiring 210 new employees and retaining 900.
The state of Illinois gave Capital One Financial Corp., the bank holdings and credit card company, nearly $20.8 million in tax breaks from Illinois taxpayers in 2015. Headquartered in McLean, Va., Capital One is also the eighth-largest U.S. commercial bank when ranked by consolidated assets. According to a valuation published by Forbes in May 2016, Capital One has an estimated market value of nearly $40 billion.
The Illinois tax breaks were administered under the Economic Development for a Growing Economy, or EDGE, tax credit program.
Under the terms of the agreement, in exchange for retaining 900 jobs and hiring 210 new employees, Capital One received credits equal to $20.8 million. The deal was formally executed in April 2015, but documents from the agreement show that negotiations for the deal had started by 2012 and that key hiring dates had occurred before the 2015 signing. The 200 new employees were hired from 2013 to 2014 and specialized in information technology, management, finance and risk management.
The retained employees worked in several fields including operations, marketing, IT, finance, risk management, vendor management, analysis and process/project management.
But Capital One is just one the many large corporations to receive tax breaks through the EDGE program. Since the program’s start in 2001, the state government has spent more than $1.3 billion in tax credits for politically connected companies. EDGE’s supporters claim that the program has brought in 34,000 jobs; however, EDGE has not been effective in spurring jobs growth. Illinois is still nearly 20,000 jobs shy of the peak it achieved in September 2000. Meanwhile, Illinois’ neighboring states have all surpassed their 2000 jobs levels.
On top of being ineffectual at creating jobs, EDGE is also unfair. By giving millions of dollars in tax credits to multibillion-dollar corporations like Capital One, Springfield is pushing that cost onto other taxpayers and businesses not subsidized by the state government.
But EDGE’s time has run out.
The tax credit program expired on Dec. 31, 2016, but the General Assembly and Gov. Bruce Rauner resurrected the tax credit program and extended it through April 30, 2017. Now, with the deadline having passed, EDGE’s fate hangs in the balance.
Some members of the General Assembly have proposed bills to keep the program going.
House Bill 1125, sponsored by state Rep. Natalie Manley, D-Joliet, would extend EDGE through May 31, 2017. Originally filed by House Speaker Mike Madigan, HB 1125 received overwhelming support in the House, where it passed 107-3. The bill now heads to the Illinois Senate. This bill, if enacted, would give lawmakers time to pass a permanent replacement for EDGE while still making tax credit agreements.
Senate Bill 2071, sponsored by state Sen. Pam Althoff, R-McHenry, would replace EDGE with the Transforming, Helping, and Reviving Illinois’ Versatile Economy (THRIVE) Job Creation Tax Credit Act. THRIVE would continue many of EDGE’s policies, though would only allow credits to be applied to new hires. However, under THRIVE, new hires don’t even have to be from Illinois. The bill provides that companies that transfer out-of-state workers into Illinois would be eligible for credits, as SB 2071 counts such relocations as new hires. THRIVE, though postponed, is still alive, as it has been granted multiple deadline extensions.
House Bill 2744, sponsored by state Rep. Michael Zalewski, D-Riverside, would create the Business and Employment Development Tax Credit Act. HB 2744 is also supported by the Illinois Chamber of Commerce. The measure would calculate credits at 10 percent of the wages paid to new or retained full-time employees and 5 percent of wages to new or retained part-time employees. Once passed, HB 2744 would be permanent, unlike EDGE, which contains a sunset provision. However, the chances of HB 2744 passing appear slim as it has been re-referred to the House Rules Committee, a legislative black hole that stops bills that do not have the blessing of House leadership.
Springfield lawmakers should reject THRIVE, EDGE and any other measure that would seek to continue the failed corporate tax credit experiment. EDGE did not solve Illinois’ jobs problem, and neither will THRIVE. Illinois lawmakers should focus on pro-growth, taxpayer-friendly policies that will organically attract residents and businesses to the state. Sensible policies include: implementing a property tax freeze for Illinois homeowners, who pay some of the highest property taxes in the country, and reforming Illinois’ high workers’ compensation costs, instead of funding selective favors for politically connected corporations. Capital One is one of the largest financial institutions in the country – Illinois politicians shouldn’t be offering state tax credits to it. This policy is not fair to taxpayers or to the businesses that are not lucky enough to receive tax credits.