Lawmakers and special interests propose revamped EDGE tax credit program

March 20, 2017
By Brendan Bakala

As state debts mount and budget plans remain in limbo, Illinois lawmakers move to expand EDGE tax credits.

Illinois lawmakers have put forth new proposals to continue the state’s corporate tax credit program, which is set to expire in April. Politicians have proposed extending these corporate tax credits despite Illinois’ nearly $13 billion in unpaid bills, $130 billion pension crisis, $8 billion in deficit spending, and recently issued calls by politicians for nearly $7 billion in tax hikes.

But the Economic Development for a Growing Economy, or EDGE, tax credit program has not only allowed the government to give away tax credits and pick winners and losers among businesses, but also has failed to deliver on its promises of long-term economic development. Supporters of EDGE have claimed the program has created 34,000 jobs since 2001, though Illinois is down a net of 40,000 jobs since then.

The proposals

State Rep. Michael Zalewski, D-Riverside, sponsored House Bill 2744, a plan to revamp and expand the EDGE tax credit program. The plan has the support of the Illinois Chamber of Commerce.

The proposal effectively rebrands the EDGE program under the Business and Employment Development Tax Credit Act. The measure would cap total credits at $50 million annually and set a five-year duration for each credit. Under the revised program, the credits would be calculated as 10 percent of the wages paid to new or retained full-time employees and 5 percent of the wages paid to new or retained part-time employees, essentially requiring taxpayers to pick up a portion of a recipient company’s payroll. Companies could receive additional amounts for hiring in areas with high poverty levels or for paying new or retained full-time employees wages that exceed 150 percent of the state’s minimum wage.

It should be noted that the proposal would also allow taxpayer money to be awarded to companies for retaining workers, as opposed to the current law, which requires EDGE tax credits to be used to hire new workers. The Liberty Justice Center filed suit against the Illinois Department of Commerce and Economic Opportunity, or DCEO, alleging that the DCEO was breaking the law by giving EDGE credits to companies for simply retaining workers. Upon HB 2744’s passage, it would be legal for the state to offer tax credits to companies that merely keep jobs in Illinois. The program has no sunset date and would be permanent if it becomes law.

Zalewski and the Illinois Chamber of Commerce aren’t the only ones with plans for more corporate handouts.

State Sen. Pam Althoff, R-McHenry, introduced another plan to keep the corporate tax credits flowing. Senate Bill 2071 would create the Transforming, Helping, and Reviving Illinois’ Versatile Economy (THRIVE) Job Creation Tax Credit Act.

The THRIVE Act would only allow credits to be applied to new hires and collected over 10 years, or 15 years if the company locates its project in a poor area or one with high unemployment.

Under SB 2071, the new hires don’t even have to be from Illinois.

Section 25 of the bill, which concerns relocations within Illinois, specifically mentions companies moving in from out of state. According to this provision, “any full-time employee of an eligible business relocated to Illinois in connection with that qualifying project is deemed to be a new employee for purposes of this Act.”

Lawmakers should let EDGE expire

The EDGE program, which has granted $1.3 billion worth of tax credits to handpicked companies since 2001, expired on Dec. 31, 2016. However, the General Assembly passed, and Gov. Bruce Rauner signed, a law extending EDGE through April 30, 2017.

While lawmakers negotiate how much taxpayer money to give away to the politically connected, Illinoisans continue to suffer in a state with skyrocketing debts and deficits. Rather than shifting more of the tax burden onto Illinois’ families, who already have the heaviest tax burden in the nation, lawmakers in Springfield should consider crafting policies that attract companies to the state, instead of bribing them.

Politicians should let the failed EDGE program expire.

TAGS: cronyism, DCEO, EDGE: Economic Development for a Growing Economy, Michael Zalewski, tax credits