Sears to cut 400 jobs, despite state, local tax breaks

Sears to cut 400 jobs, despite state, local tax breaks

Sears Holdings has dropped below the job threshold necessary to qualify for the $15 million in annual state tax credits for which it was once eligible.

Sears Holdings Corp. has announced plans to lay off 400 full-time employees, mostly from its corporate offices located in Hoffman Estates, Illinois. The retailer made the announcement June 13, as part of an ongoing effort to save more than $1 billion in costs. The job losses come despite the fact that Sears entered a tax break deal with the state in 2011 after the company threatened to leave Illinois, according to the Chicago Tribune. Sears received approximately $20 million in payments through the Economic Development for a Growing Economy program, according to Crain’s Chicago Business. As part of the deal, Sears had to maintain a minimum of 4,250 employees. With the new layoffs, Sears will fall below the required baseline of specified employees, and will no longer qualify for the state tax break. Sears is still eligible for a property tax agreement, however, and will continue to participate in that program, according to Crain’s.

Though the state extended the deal in 2011, the origins of the tax break package go back nearly 30 years. In 1989, an Economic Development Area, or EDA, was established in the village of Hoffman Estates in an effort to get Sears to stay in Illinois and move to Hoffman Estates, instead of going to North Carolina. The EDA law provided tax incentives to Sears in exchange for the company’s keeping 2,000 jobs in Illinois.

However, the deal was not permanent. Facing the expiration of the Sears agreement in 2012 and a possible departure by Sears, then-Gov. Pat Quinn signed into law in 2011 a measure that extended the life of the EDA and made Sears eligible for a tax break deal worth $15 million annually for 10 years, so long as Sears retained at least 4,250 specified types of jobs in the state, along with other requirements.

But these deals bore little fruit.

Despite the EDA and the 2011 law, Sears has not reported an annual profit in six years, according to Reuters. And with this latest round of job cuts, Sears will fall below the 4,250-job baseline required by the state and will no longer be eligible for the tax breaks. However, because Sears’ property tax deal has looser requirements with respect to the types of jobs that can be retained, Sears will stay eligible for that deal.

No amount of tax credits at either the state or local level will create the kind of economic growth Illinois desperately needs. The Prairie State has some of the highest property taxes in the nation and some of the highest workers’ compensation costs in the region. On top of that, Illinois has some of the highest LLC startup fees in the nation, making it harder for small businesses to set up shop.

Instead of giving out special deals to select companies, Illinois should roll out pro-growth reforms that will organically grow jobs and attract all kinds of businesses.

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